Accounting for Receivables – Using the Information on the Financial Statements

Evaluation of Short-term Liquidity Collection of trade receivables has a significant impact upon a company’s cash position. Four ratios assist in evaluating short-term liquidity: 1.The current ratio (Current assets ÷ Current liabilities) measures a company’s ability to satisfy its short-term debts. 2.The acid test ratio or quick ratio measures a company’s ability to satisfy its short- term debts immediately. (Cash […]

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