Financial Management Assignment Guide 2022

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, Compiled by Tello Email: Mobile:0717513144

Financial Management Assignment Guide

1. Current ratio
CR = Current Assets/ Current liabilities
 A CA is an asset that is easily converted to cash or expected to be
converted to cash within a fiscal year or operating cycle.
 Examples of current assets
 Inventory
 Accounts receivables
 Cash
 Taxes receivables
 Supplies
 A CL consists of short-term financial obligations that are typically due
within one year. Current liabilities could also be based on a company's
operating cycle, which is the time it takes to buy inventory and convert
it to cash from sales.
 Examples of current liabilities
 Accounts payables
 Accrued expenses (interest payments, property taxes, employee
wages)
 Taxes payables
 Unearned revenue
 Dividends payables
 Payroll liabilities
 Short term debt
 Comment: The current ratio is a measure of liquidity that compares all of a
company’s current assets to its current liabilities. If the ratio of current assets
over current liabilities is greater than 1.0, it indicates that the company has
enough available to cover its short-term debts and obligations.


2. Acid test ratio
 ATR = (Cash + Short term investments + current receivables –
inventory –prepaid expenses) / current liabilities


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