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ACCOUNTING and RATIO ANALYSIS
What is the accounting equation that forms the foundation of double-entry bookkeeping?
Assets = Liabilities + Owner's Equity. Every transaction affects at least two accounts, keeping this equation in balance.
What is the formula for the Quick Ratio (Acid Test Ratio)?
(Current Assets minus Inventory) divided by Current Liabilities
What does the Current Ratio measure and what is its formula?
Current Ratio measures a bank's short-term liquidity by dividing Current Assets by Current Liabilities. A ratio above 1 indicates the entity can meet its short-term obligations.
What does a Current Ratio below 1 indicate about a company?
Company cannot meet its short-term obligations with current assets
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