Accounting Tools

OCTOBER 19, 2023

Related Courses Business Ratios Guidebook Treasurer's Guidebook Working Capital Management What is the Liquidity Index? The liquidity index calculates the days required to convert a company's trade receivables and inventory into cash. Multiply the ending inventory balance by the average inventory liquidation period.

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Accounting Tools

MAY 13, 2024

Related Articles Cash Flow Adequacy Ratio Defensive Interval Ratio Degree of Relative Liquidity Doomsday Ratio Liquidity Index Solvency Ratio In short, the working ratio is excessively imprecise, and so is not recommended as a method for evaluating the financial condition of a business.

Financial Statements 40

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Accounting Tools

JUNE 16, 2023

The difference between the two measurements is that the quick ratio focuses on the more liquid assets , and so gives a better view of how well a business can pay off its obligations. Inventory is a questionable item to include in an analysis of the liquidity of a business, since it can be quite difficult to convert to cash in the short term.

Financial Statements 75

Financial Statements 75

Accounting Tools

OCTOBER 6, 2023

Under the dollar-value LIFO method, the basic approach is to calculate a conversion price index that is based on a comparison of the year-end inventory to the base year cost. The Conversion Price Index The key concept in the dollar-value LIFO system is the conversion price index.

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Accounting Tools

SEPTEMBER 25, 2023

An exchange-traded fund (ETF) is a security that tracks an index of stocks or other assets , and which is traded on a stock exchange in the same manner as a share of common stock. An ETF is highly liquid , so investors can easily buy and sell shares on a daily basis. Related Articles Money Market Fund Mutual Fund

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Accounting Tools

JUNE 21, 2023

It is a common measure of the short-term liquidity of a business. The formula is: Current assets ÷ Current liabilities = Current ratio Since the ratio is current assets divided by current liabilities, the ratio essentially implies that current liabilities can be liquidated to pay for current assets.

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Accounting Tools

JUNE 10, 2023

Related Articles Acid-Test Ratio Cash Coverage Ratio Cash Flow Adequacy Ratio Degree of Relative Liquidity Doomsday Ratio Liquidity Index In short, there are so many variables that can impact the ability to pay over the long term that using any ratio to estimate solvency can be dangerous.

Financial Statements 40

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