80 what is the basic balance sheet identity the basic

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80. What is the basic balance sheet identity? The basic balance sheet identity is: Assets = Liabilities + Stockholders' Equity. 81. What primarily distinguishes current assets from the other classes of assets on the balance sheet? Current assets are assets that mature or are expected to be realized as cash within 1 year.
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82. What primarily distinguishes current liabilities from the other classes of liabilities on the balance sheet? Current liabilities are liabilities that come due or are expected to be paid out in cash within 1 year. 83. There are six classes of financial ratios. Name them. The six classes of financial ratios are: liquidity, asset activity, leverage, coverage, profitability, and market value. 84. What do liquidity ratios measure? Liquidity ratios measure how easily the firm can lay its hands on cash. 85. What do asset activity ratios measure? Asset activity ratios are designed to measure how effectively a firm manages its assets. 86. What do leverage ratios measure? Leverage ratios measure the amount of financial leverage. 87. What do profitability ratios measure? Profitability ratios measure how effectively the firm is able to generate profits. 88. What do coverage ratios show? Coverage ratios show the number of items a firm can "cover" or meet a particular financial obligation. 89. What do market value ratios relate the market value of the firm's common stock to? Market value ratios relate the market value of the firm's common stock to earnings per share, dividends per share, and book value per share. 90. Common-size analysis shows items as percentages rather than as amounts of money. The balance sheet and income statement items are expressed as percentages of what? Common-size analysis shows items as percentages rather than as amounts of money. Balance sheet items are expressed as percentages of total assets. Income statement items are expressed as percentages of sales. 91. Do accounting statements reflect past or future decisions? Accounting statements provide historical information that reflects past (and not future) decisions. 92. What is the payout ratio? The payout ratio is the proportion of earnings that the firm paid to shareholders as cash dividends.
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93. Assets can be classified based on what? Assets can be classified based on maturity, liquidity, market value and book value. 94. Describe the current ratio. The current ratio is current assets divided by current liabilities. 95. Describe the equity multiplier. Equity multiplier is total assets divided by stockholders' equity. VI. Essays or Longer Answers 96. Liquidity ratios measure how easily the firm can lay its hands on cash. Name and describe at least two of these ratios. The current ratio is current assets divided by current liabilities The quick ratio is cash plus marketable securities plus receivables divided by current liabilities; or simply current assets minus inventory divided by current liabilities.
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