Word of the Week: Acid Test Ratio
Liquidity! What is it? It is the ability of current assets to meet current liability when due. How does a business owner test they have enough liquidity? They will use what is called an acid test ratio. The ratio is found by dividing the most liquid current assets (cash, marketable securities, and account receivables) by current liabilities. In general, the ratio should be equal to one or greater. In other words, for every $1.00 in current debt, there should be $1.00 in
Accounting word of the Week: Target Income Sales
Target Income Sales
Accounting word of the Week: Receivable Turnover
Many banks will compute financial ratios to evaluate the liquidity of a company’s account receivables.