Explore BrainMass

Explore BrainMass

    The Accounting Cycle - Ratios

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    1. Answer the following question using an essay format with a maximum that ranges between 300-500 words for each question.
    a) There are three main forms of firm's ownership sole proprietorships partnerships and corporations in business organizations. identify and explain these forms in private firms.
    b) There are three types of activities (operating financing an investing) generate funds to the organization. identify and explain with examples these activities in private firms.

    See attached.

    © BrainMass Inc. brainmass.com October 2, 2020, 5:17 am ad1c9bdddf


    Solution Preview

    See the attached file.

    a. Liquidity ratios are used to establish a company's ability to pay its short-term debt.

    Current ratio = current assets / current liabilities
    A higher current ratio is a better current ratio. It shows the company's ability to pay the short term debt using its current assets.

    2012 2013
    Current Assets 2000 3000
    Current Liabilities 2000 4000
    Current Ratio 1 0.75

    This shows the current ratio going down. It also shows that the company is no longer able to pay all it short term debt using the current assets.

    Quick Ratio = (Cash + Short-term investments + Accounts Receivable) / current liabilities
    This ratio focuses on the more liquid of the short term assets, mainly excluding inventory. Again, a higher number is better.

    2012 2013
    Cash 500 500
    Trade Receivables 1000 1500
    Current Liabilities 2000 4000
    Quick ...

    Solution Summary

    Calculations of ratios given balance sheet and Profit/Loss for Golf Corporation. Brief interpretation of calculations provided.