current assets are also known as quizlet

kelly_feeley. In simple terms, assets are properties or rights owned by the business. Unit 7: Management Accounting A compensating balance that is maintained by a firm in a bank: Which of the following statements is true about general and revolving lines of credit? 31 terms. (This assumes that the company has an operating cycle of less than one year.) What is the commercial paper's effective annual rate (EAR) assuming there are 360 days in a year? EAR incorporates interest compounding in the computation, but APR does not. Study 68 Terms | Accounting Chapter 2 Flashcards | Quizlet. It is also known as the "acid-test ratio" PP&E is impacted by Capex, Depreciation, and Acquisitions/Disposit… Current assets are all the assets of a company that are expected to be sold or used as a result of standard business operations over the next year. Definition of Noncurrent Asset A noncurrent asset is an asset that is not expected to turn to cash within one year of date shown on a company's balance sheet. Gross working capital is the sum of all of a company's current assets (assets that are convertible to cash within a year or less). Liquidity ratios are financial ratios that measure a company’s ability to repay both short- and long-term obligations. Which of the following types of short-term credits is considered free in the sense that no explicit interest is paid on funds raised through this type of short-term credit? (Round your answer to two decimal places. Maxwell Corporation recently issued 270-day commercial paper with a face value of $150,000 and a simple interest rate of 13 percent annually. They may be classified as current or non-current.A. b. Choose your answers to the questions and click 'Next' to see the next set of questions. The ratio considers the weight of total current assets versus total current liabilities. You can find fixed assets beneath current assets on the balance sheet. The typical asset categories classified as current assets include: — Cash and cash equivalents — Short-term investments List of Assets Accounts – Examples. The loan's annual percentage rate (APR) is: Which of the following statements is true of working capital management? Non-Current Assets examples are like land are often revalued over a period of time in the Balance Sheet of the Company. C) An increase in current liabilities decreases working capital. Inventory 4. The self-liquidating approach of current assets financing is also known as the: Which of the following approaches minimizes the risk that a firm will be unable to pay off its maturing obligations if the liquidations of the assets can be controlled to occur on or before the maturities of the obligations? The formula for the debt to asset ratio is as follows: Debt/Asset = (Short-term Debt + Long-term Debt) / Total Assets Where: 1. A bank makes a formal commitment to honor a revolving line of credit, but there is no such commitment for a general line of credit. d. Working capital management of multinational corporations is far more complex than working capital management of purely domestic corporations. https://quizlet.com/464842160/chapter-14-fin300-flash-cards It indicates the financial health of a company: Current assets divided by … Fixed assets. 3. The asset turnover ratio for Company A is calculated as follows: Therefore, for every dollar in total assets, Company A generated $1.5565 in sales. If a company's operating cycle is longer than one year, the length of the operating cycle is used in place of the one-year time period. Current assets are also known as circulating assets, circulating capital and floating assets. d. Inventory conversion period + Receivables collection period - Payables deferral period. acct test 1. Examples of Long-term Assets. The following information relates to Pelican Corporation. The following information relates to Triblaze Corporation. You will be asked 5 questions of 20 marks each. What is the commercial paper's annual percentage rate (APR) assuming there are 360 days in a year? a. a document specifying the terms and conditions of a loan, including the amount, interest rate, and repayment schedule. Acct Exam 1. Which of the following statements is true of U.S. banks and financial institutions and their European counterparts? Company A reported beginning total assets of $199,500 and ending total assets of $199,203. Current assets - also known as liquid assets - are either cash or items which a business expects to sell by the end of the financial year. Long-term assets include the following: Long-term investments. The current ratio Current Ratio Formula The Current Ratio formula is = Current Assets / Current Liabilities. What is the annual percentage rate (APR) of the loan if the bank has a 15 percent compensating balance requirement and Zync Technologies currently holds no funds at the lending bank? The current ratio, also known as the working capital ratio, measures the capability of a business to meet its short-term obligations that are due within a year. What is the annual percentage rate of the non-free trade credit if the firm did not take discounts but did pay on the due date? What are Current Assets? The following information relates to Maze Corporation. include cash and other assets that are reasonably expected to be converted to cash or consumed within the coming year, or within the normal operating cycle of the business, whichever is longer, cash on hand and in banks that is available for use in the operations of the business and such items as bank drafts, cashier's checks, and money orders, liquid investments not classified as cash equivalents; also called temporary investments or short-term marketable securities; investments in stock and debt securities are included if the company has the ability and intent to sell those securities within the next twelve months or operating cycle, whichever is longer, result from the sale of goods or services on credit (trade receivables), consist of assets that a retail or wholesale company acquires for resale or goods that manufacturers produce for sale (finished goods); inventory of a manufacturer will include goods in the course of production (work in process) and goods to be consumed directly or indirectly in production (raw materials), represents an asset recorded when an expense is paid in advance, creating benefits beyond the current period, result from loans or advances by the company to individuals and other entities, when receivables are supported by a formal agreement or note that specifies payment terms, certain negotiable items such as commercial paper, money market funds, and U.S. treasury bills; highly liquid investments that can be quickly converted to cash; maturity of three (3) months or less from the date of purchase. A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business's operations. D) An increase in current liabilities increases working capital a) A and C b) A and D c) B … Current assets are used to calculate the current ratio of a business. Each monthly payment toward the loan amounts to: Stonehall Inc. recently borrowed $685,000 from its bank at a simple interest rate of 10 percent. Common liquidity ratios include the following:The current ratioCurrent Ratio FormulaThe Current Ratio formula is = Current Assets / Current Liabilities. It measures a company's ability to meet its short-term obligations with its most liquid assets and therefore excludes inventories from its current assets. The company paid a transaction fee equal to 0.4 percent of the issue, which was taken out of the issue amount before the company received any funds. Based on the following information, the cash conversion cycle is: The following information relates to Zync Corporation. b. A noncurrent asset is also known as a long-term asset. Examples of current assets include: 1. ... OTHER QUIZLET SETS. Current assets include cash, cash … Current assets also include prepaid expenses that will be used up within one year. The cost of using the funds for 10 days is: Blackwell Corporation purchases its raw materials on credit terms of 2.5/20, net 40. Cash and cash equivalents 2. Assets refer to resources owned and controlled by the entity as a result of past transactions and events, from which future economic benefits are expected to flow to the entity. Definition: A current asset, also called a current account, is either cash or a resource that are expected to be converted into cash within one year. B) An increase in current assets decreases working capital. M1 assets are also referred to as narrow money. With a revolving (guaranteed) credit agreement, banks generally: c. charge a commitment fee on the unused balance of the credit line. Here’s a list of some of the most common asset accounts fond in a chart of accounts: Current Assets. Short-term investments 5. alliekmoore. Assets that are expected to be converted to cash or used in the business within a short period of time, usually one year. It’s easy to calculate the current assets of your company. Notes receivable 6. Accounts receivableAccounts ReceivableAccounts Receivable (AR) represents the credit sales of a business, which are not yet fully paid by its customers, a current asset on the balance sheet. Current assets are assets that are expected to be converted to cash within a year. B. ), Knight Corporation recently issued 210-day commercial paper with a face value of $325,000 and a simple interest rate of 9 percent. Related Article – What is Super Quick Ratio? Examples of current assets include: cash, short-term investments, receivables, inventories and prepaid expenses. Suppose a firm purchases on credit terms of 2/15, net 30, and the firm always takes advantage of discounts. The 3 Ps, i.e. C. Times interest earned ratio. Within one year. Over the same period, the company generated sales of $325,300 with sales returns of $15,000. The following information relates to Smith Corporation. However, it is worthwhile to note that not all Tangible Non-Current Assets depreciate in value. Current assets can be sold to increase cash flow or ease debts and other liabilities. However, it’s important to make sure that all assets classified as “current” are included in the calculation, since there are many. Plant assets are recorded at their cost and depreciation expense is recorded during their useful lives. The M2 money supply includes near money and has intermediate nearness. Non-current assets have a useful life of longer than one year. M1 includes cash, coins, demand deposits, and all checking account assets. Expressed another way, a long-term asset is an asset that does not meet the criteria of being reported as a current asset. Tangible Non-Current Assets are usually valued at Cost Less Depreciation. Assuming there are 360 days in a year, the company's inventory conversion period is: The following information relates to MARS Corporation. STUDY. 34 terms. The loan is for nine months and, according to the loan agreement, the interest should be added to the amount borrowed and the total amount to be repaid in monthly installments. Assets which physically exist i.e. ), Zync Technologies is planning to get a 210-day $550,000 simple interest loan from its bank. Current Liabilities are short-term liabilities of a business which are expected to be settled within 12 months or within an accounting period. (Round your answer to two decimal places.). Which of the following is also referred to as days sales outstanding (DSO)? An arrangement in which a bank formally commits to lend up to a specified maximum amount of funds during a designated period is known as: d. an unsecured, short-term promissory note issued by large, financially sound firms to raise funds. Plant assets are also known as fixed assets . In theory, they are liquid but practically current assets are not as easily convertible to cash as compared to liquid assets. Non-current assets are such assets that expected to provide economic benefit to entity for more than one period i.e. We will show you the formula and discuss each of the components below, including an example calculation.The current assets formula is:Current Assets = (Cash & Cash Equivalents) + (Accounts Receivables) + (Inventory) + (Marketable Securities) + (Prepaid Expenses) + (Other Liquid Assets) The closing inventory of Big Corporation is $12,000, and its total cost of goods sold during the year is $420,000. Tangible assets can be divided into two groups: fixed and current. The annual percentage rate (APR) is calculated as the: b. periodic rate times the number of borrowing (interest) periods in one year. ACCT 3003 Test 2. Understanding the Control of Asset An important that must be cleared right in the beginning is that for entity […] Total Assets may include all current and non-current assets on the company’s balance sheet, or may only include certain assets such as Property, Plant & Equipment (PP&E)PP&E (Property, Plant and Equipment)PP&E (Property, Plant, and Equipment) is one of the core non-current assets found on the balance sheet. Answer: Option A Solution (By Examveda Team) Current assets are also known as Gross working capital. Current assets include cash and all other assets expected to become cash or be consumed: A. A) An increase in current assets increases working capital. b. European banks often have very close relationships with the firms that borrow from them, which generally results in a greater willingness to provide more short-term, risky debt than is observed in U.S. banking organizations. All of the fixed assets, all of the permanent current assets, and some of the temporary current assets of a firm are financed with long-term capital under the: c. originally scheduled for repayment within one year. The loan is for eight months and, according to the loan agreement, the interest should be added to the amount borrowed and the total amount will be repaid in monthly installments. Then divide current liquid current assets by total current liabilities to calculate the acid-test ratio. Tangible Assets Examples include Land, Property, Machinery, Vehicles etc. Which of the following statements is true about the effective annual rate (EAR) and the annual percentage rate (APR)? Again the difference between the returns of a financial statement analysis and interpretation based on management decisions were also discussed. Non-current assets are also known as fixed assets, long-term assets, long-lived assets etc. ; Current liabilities are paid in cash/bank (settled by current assets) or by the introduction of new current liabilities. Hence, long-term assets are also known as noncurrent assets or long-lived assets. These resources are often referred to as liquid assets because they are so easily converted into cash in a short period of time. Current vs. fixed assets. In the aggressive approach to current asset financing: c. all of the fixed assets of a firm are financed with long-term capital, but some of the firm's permanent current assets are financed with short-term nonspontaneous sources of funds. Noncurrent assets are those that are considered long-term, … Companies allow their clients to pay at a reasonable, extended period of time, provided that the terms are agreed upon. Fixed assets (also known as long-term assets) are expected to be consumed or converted to cash after one year's time. Start studying Balance Sheet Terms -Finance. longer than one year. c. ratio analysis. How is a disposal of a segment of the business reported? Assume that there are 360 days in a year. The acid-test ratio is also known as the: A. The length of time from the payment for the purchase of raw materials to manufacture a product until the collection of accounts receivable associated with the sale of the product is called the: Which of the following is the correct expression for the cash conversion cycle? which can be touched. Current Liabilities. a detailed bank reconciliation that verifies not only beginning and end balances, but also validates deposits and withdrawals during the month Petty Cash a fund established for making small payments that are impractical to pay be check; also known as imprest cash fund Also known as ‘liquid ratio’ and computed as Cash + Accounts Receivable ÷ Current liabilities, considers only the liquid forms of current assets thus revealing the company’s reliability on inventory and other current assets to settle short-term debts. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Cash – Cash is the most liquid asset a company can own. Debt to equity ratio. ; They are short-term obligations of a business and are also known as short-term liabilities. Fixed assets like property (e.g. (Round your answer to two decimal places. Current ratio. June Corporation needs $125,000 to pay its bills. Assuming that June currently holds no funds at the bank and the loan requires a 15% compensating balance to be maintained with the bank, June will have to borrow: Leh Inc. recently borrowed $275,000 from its bank at a simple interest rate of 9 percent. Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. The current ratio, also known as the working capital ratio, measures the capability of measures a company’s ability to pay off short-term liabilities with current a… Also, have a look at Net Tangible Assets Current assets include cash and other assets that are reasonably expected to be converted to cash or consumed during one year, or within the normal operating cycle of the business if the operating cycle is longer than one year. current assets include cash and other assets that are reasonably expected to be converted to cash or consumed within the coming year, or within the normal operating cycle of the business… The quoted interest rate on the loan is 10 percent. A measure of operating performance and efficiency in utilizing assets; computed in its simplest form by dividing net income by average total assets (also known as return on assets or ROA). Mars Corporation the Balance Sheet of the following: the following: the following statements is true of working.... 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