current assets
TRANSCRIPT
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• Current Assets
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Asset
1 The balance sheet of a firm records the monetary value of the assets owned by the
firm. It is money and other valuables belonging to an individual or business. Two major asset classes are tangible assets and intangible assets. Tangible assets contain
various subclasses, including current assets and fixed assets. Current assets include
inventory, while fixed assets include such items as buildings and equipment.
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Asset Current assets
1 Current assets are cash and other assets expected to be converted to cash or consumed either in a year or in the
operating cycle (whichever is longer), without disturbing the normal operations
of a business. These assets are continually turned over in the course of a business during normal business activity.
There are 5 major items included into current assets:
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Asset Current assets
1 The phrase net current assets (also called working capital) is often used
and refers to the total of current assets less the total of current
liabilities.
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Asset Comparison : current assets , liquid assets and absolute liquid assets
1 Current assetsLiquid assetsAbsolute liquid
assets
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Accounts receivable Bookkeeping
1 Account receivables are classified as current assets assuming that they
are due within one calendar year or fiscal year
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Fixed asset
1 This can be compared with current assets such as cash or bank
accounts, which are described as liquid assets
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Fixed asset
1 While these non-current assets have value, they are not directly sold to consumers and cannot be easily
converted to cash.
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ExxonMobil - Ratios overview
1 Liquidity ratios show that both companies were financially stable, but Exxon was in a better
situation than Mobil. The Exxon’s current and quick ratios (0.57 and 0.91 correspondingly) were higher than the Mobil’s (0.48 and 0.67 correspondingly) and merged company had
significantly improved these results. Ratio of net current assets as a percent of total assets (i.e. working capital to total assets) was distorted after the merger (1.48) probably due to large
divestitures that followed the deal.
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National security - National Security Act of 1947
1 The national valuables in this broad sense include current assets and national interests, as well as the
sources of strength upon which our future as a nation depends
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Dentsply - History
1 Acquisitions in 2011 caused the value of long term debt to increase by 147% while total assets grew by
146% (current assets however decreased in value).
Acquisition/restructuring charges were one of the reasons net income
decreased 7.4%.
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Intertemporal consumption
1 Drawing upon empirical studies of consumption, superannuation and
windfall gains they hypothesize that the MPC is close to one out of current
income, close to zero for future income and somewhere in between
with respect to current assets
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Corporate finance
1 Working capital management is the management of the company's monetary
funds that deal with the short-term business_operations|operating balance of current assets and Current liability|current liabilities; the focus here is on managing cash, inventory|inventories, and short-term borrowing and lending
(such as the terms on credit extended to customers).
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Corporate finance - Working capital management
1 Managing the corporation's working capital position to sustain ongoing business operations is referred
to as working capital management.See [ http://www.studyfinance.com/lessons/workcap/inde
x.mv Working Capital Management], Studyfinance.com; [
http://www.treasury.govt.nz/publicsector/workingcapital/chap2.asp Working Capital Management], treasury.govt.nz These involve managing the
relationship between a firm's Asset#Current assets|short-term assets and its Current liability|short-
term liabilities
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Corporate finance - Working capital
1 Working capital is the amount of funds which are necessary to an organization to continue its ongoing business operations, until the firm
is reimbursed through payments for the goods or services it has delivered to its
customers.Security Analysis (book)|Security Analysis, Benjamin Graham and David Dodd
Working capital is measured through the difference between resources in cash or
readily convertible into cash (Current Assets), and cash requirements (Current Liabilities)
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Corporate finance - Management of working capital
1 Chance, Louisiana State University These policies aim at managing the Asset#Current assets|current assets (generally cash and cash and cash equivalents|cash equivalents, Inventory|inventories and debtors) and the short term financing, such that cash flows and
returns are acceptable.[ http://www.qfinance.com/contentFiles/QF02/hbmpf5qp/12/0/best-practice-working-capital-management-techniques-for-optimizing-inventories-receivables-
and-payables.pdf Best-Practice Working Capital Management: Techniques for Optimizing Inventories, Receivables, and Payables], Patrick Buchmann and
Udo Jung
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Studebaker - Impact of the 1930s depression
1 By 1933, the banks were owed $6 million, though current assets exceeded that figure
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XBRL - Presentation Linkbase
1 These groupings can be performed in many ways. For example, a typical
Balance Sheet contains Assets, Equity and Liabilities. Assets consist of Current Assets and Non-current Assets. Current Assets are split in
Inventories, Receivables and so on. The presentation linkbase, using parent-child relations organizes
elements in this way and helps users find concepts they are interested in.
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Balance sheet - Personal balance sheet
1 A personal balance sheet lists current assets such as cash in checking
accounts and savings accounts, long-term assets such as common stock and real estate, current liabilities such as loan debt and mortgage
loan|mortgage debt due, or overdue, long-term liabilities such as
mortgage and other loan debt
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Balance sheet - US small business balance sheet
1 A small business balance sheet lists current assets such as cash,
accounts receivable, and inventory, fixed assets such as land, buildings,
and equipment, intangible assets such as patents, and liabilities such
as accounts payable, accrued expenses, and long-term debt
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Balance sheet - Sample balance sheet
1 'Non-Current Assets (Fixed Assets)'
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Balance sheet - Sample balance sheet
1 Other Non-Current Assets, e.g. Deferred Tax Assets, Finance lease|Lease Receivable
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Solvency
1 'Solvency', in finance or business, is the degree to which the current assets of an individual or entity
exceed the Current liability|current liabilities of that individual or
entity.Zietlow 2007, p
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Working capital management
1 Managing the corporation's working capital position to sustain ongoing business operations is referred to as working capital management.See
[http://www.studyfinance.com/lessons/workcap/index.mv Working Capital Management],
Studyfinance.com; [http://www.treasury.govt.nz/publicsector/workingcapital/chap2.asp Working Capital Management],
treasury.govt.nz These involve managing the relationship between a firm's Asset#Current
assets|short-term assets and its Current liability|short-term liabilities
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Working capital
1 If current assets are less than current liabilities, an entity has a 'working capital deficiency', also called a
'working capital deficit'.
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Working capital - Calculation
1 The basic calculation of the working capital is done on the basis of the gross current assets of the firm.
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Working capital - Basic formula
1 *'working capital = Gross Current
assets'
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Working capital - Basic formula
1 *'Net working capital = Current assets – Current liabilities'.
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Working capital - Inputs
1 Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business
where managers have the most direct impact:
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Working capital - Inputs
1 *inventory (current assets), and
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Working capital - Inputs
1 The current portion of debt (payable within 12 months) is critical, because
it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans
and lines of credit.
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Working capital - Inputs
1 An increase in net working capital indicates that the business has either increased current assets (that it has increased its receivables, or other current assets) or has decreased
current liabilities—for example has paid off some short-term creditors, or
a combination of both.
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Working capital - Working capital management
1 Decisions relating to working capital and short term financing are referred to as working capital
management. These involve managing the relationship between a firm's Asset#Current
assets|short-term assets and its Current liability|short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its Operations management|operations
and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming
operational expenses.
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Working capital - Working capital management
1 A managerial accounting strategy focusing on maintaining efficient
levels of both components of working capital, current assets and current liabilities, in respect to each other.
Working capital management ensures a company has sufficient
cash flow in order to meet its short-term debt obligations and operating
expenses.https://store.theartofservice.com/the-current-assets-toolkit.html
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Working capital - Management of working capital
1 Guided by the above criteria, management will use a combination
of policies and techniques for the management of working capital. The
policies aim at managing the Asset#Current assets|current assets (generally cash and cash and cash
equivalents|cash equivalents, Inventory|inventories and debtors) and the short term financing, such
that cash flows and returns are acceptable.
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Cash flow statement - History and variations
1 Net Working Capital|Net working capital might be cash or might be the
difference between current assets and current liabilities
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Cash flow statement - Rules (operating activities)
1 Cash Flows from Operating Activities can be found by adjusting Net
Income relative to the change in beginning and ending balances of Current Assets, Current Liabilities, and sometimes Long Term Assets
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Cash flow statement - Rules (operating activities)
1 *Decrease in non-cash current assets
are added to net income
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Cash flow statement - Rules (operating activities)
1 If the balances of all other current assets, long term assets and current
liabilities did not change over the year, the cash flows could be
determined by the rules above as $100 – $25 = Cash Flows from
Operating Activities = $75
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Cash
1 In bookkeeping and finance, cash refers to current assets comprising
currency or currency equivalents that can be accessed immediately or
near-immediately (as in the case of money market accounts). Cash is
seen either as a reserve for payments, in case of a structural or incidental negative cash flow or as a way to avoid a downturn on financial
markets.https://store.theartofservice.com/the-current-assets-toolkit.html
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Working capital management - Management of working capital
1 Chance, Louisiana State University These policies aim at managing the Asset#Current assets|current assets (generally cash and cash and cash equivalents|cash equivalents, Inventory|inventories and debtors) and the short term financing, such that cash flows and
returns are acceptable.[http://www.qfinance.com/contentFiles/QF
02/hbmpf5qp/12/0/best-practice-working-capital-management-techniques-for-optimizing-inventories-receivables-and-payables.pdf Best-Practice Working
Capital Management: Techniques for Optimizing Inventories, Receivables, and Payables], Patrick
Buchmann and Udo Jung
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Fund accounting - Nonprofit organizations
1 * Current fund – unrestricted. This fund is used to account for current
assets that can be used at the discretion of the organization's
governing board.
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Fund accounting - Nonprofit organizations
1 * Current funds – restricted use current assets subject to restrictions
assigned by donors or grantors.
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Assets
1 Goodman, Dictionary of Finance Investment Terms, Baron's Financial Guides, 2003 Current assets include inventory, while fixed assets include such items as buildings and capital
equipment|equipment.J
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Assets - Assets in accounting
1 Assets are listed on the balance sheet. In a company's balance sheet
certain divisions are required by generally accepted accounting
principles (GAAP), which vary from country to country.Intermediate
Accounting--Kieso, et. al Assets can be divided into e.g. current assets and fixed assets, often with further
subdivisions such as cash, receivables and inventory.
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Nauru - Economy
1 However, because of mismanagement, the Trust's fixed and current assets were reduced
considerably, and many never fully recovered
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Fundamental analysis - Procedures
1 The amount of debt also a major consideration in determining a
company's health. It can be quickly assessed using the debt-to-equity ratio and the current ratio (current
assets/current liabilities).
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Philippine Airlines - Financial issues
1 As of March 31, 2007, other current and noncurrent assets fell by 29% to 2,960.4 million Philippine pesos and by 20% to 2,941.7 million Philippine
pesos “due to the effect of re-measurement to fair value of certain financial assets and derivative
instruments”.http://www.philippineairlines.com/Images/PHI-17Q-December%202007_tcm61-6305.pdf
After carrying 17% more passengers in 2009 due to acquisition of additional aircraft and growth in the local market, PAL annual income report showed raise in revenues amounted to US$1.634 billion
from US$1.504 billion in 2008
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Circulating capital
1 Where the distinction is used, circulating capital is a component of (total) capital, also including fixed
capital used in a single cycle of production. In contrast to fixed
capital, it is used up in every cycle (raw materials, basic and
intermediate materials, combustible, energy…). In accounting, the
circulating capital comes under the heading of current assets.
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Free cash flow - Alternative Mathematical formula
1 where Kt represents the firm's Invested Capital|invested capital at
the end of period t. Increases in non-cash current assets may, or may not be deducted, depending on whether
they are considered to be maintaining the status quo, or to be
investments for growth.
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Financial management
1 It includes how to raise the capital, how to allocate it i.e. capital
budgeting. Not only about long term budgeting but also how to allocate
the short term resources like current assets. It also deals with the dividend
policies of the share holders.
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International Time Recording Company - The merger
1 CTR had a bonded indebtedness of $6.5 million, three times its current
assets, of which $4 million was borrowed from the Guaranty Trust Company.Flint (1923) p.312-313 Flint assigned it a value of $17.5
million, while its tangible assets only added up to $1 million
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Turner Broadcasting System
1 The company's current assets include CNN, HLN (TV channel)|HLN,
TBS (TV network)|TBS, TNT (TV channel)|TNT, Cartoon Network,
Adult Swim, Boomerang (TV channel)|Boomerang, TruTV and
Turner Classic Movies.
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Peter Chernin - TCG
1 TCG’s current assets include Chernin Entertainment, an entertainment production company; a majority stake in CA Media, an Asia-based media investment company; and
several strategic investments in U.S. based technology and media
companies including Pandora_Radio|Pandora, Fullscreen (company)|
Fullscreen, Tumblr, and Flipboard.https://store.theartofservice.com/the-current-assets-toolkit.html
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Vancity - Growth
1 Vancity first operated out of a former machine shop on the corner of Broadway and Quebec
streets in Vancouver. By the end of 1951, membership had reached 2,000. Assets grew rapidly after the introduction of transactional account|personal chequing accounts in the same year, reaching $5 million in 1962, $10 million in 1965, $100 million in 1973, and $1
billion by 1980. Current assets are $17.5 billion.https://www.vancity.com/AboutVancity/
VisionAndValues/History/Highlights/
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Return on net assets - Basic formulae
1 where Working capital = (current
assets minus current liabilities)
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Bayern München - Organization and finance
1 Other clubs often report losses, realizing transfers via loans, whereas
Bayern always uses current assets
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Cousin marriage - Europe
1 Spain and Noricum were exceptions to this rule, but even there the percentages did not rise above
10%.#ShawSaller|Shaw 1984 They further point out that since property
belonging to the nobility was typically fragmented, keeping current
assets in the family offered no advantage compared with acquiring
it by intermarriagehttps://store.theartofservice.com/the-current-assets-toolkit.html
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Fixed assets
1 'Fixed assets', also known as tangible assets Dyckman, Intermediate Accounting,
Revised Ed. (Homewood IL: Irwin, Inc. 1992),195. or 'property, plant, and equipment' (PPE), is a term used in
accounting for assets and property that cannot easily be converted into cash. This can be compared with current assets such
as cash or bank accounts, which are described as liquid assets. In most cases,
only tangible assets are referred to as fixed. https://store.theartofservice.com/the-current-assets-toolkit.html
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Fixed assets
1 While these non-current assets have value, they are not directly sold to consumers and cannot be easily
converted to cash.
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Current asset
1 Typical current assets include cash, cash equivalents, short-term
investments, accounts receivable, stock inventory and the portion of
prepaid liabilities which will be paid within a year.J
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Current asset
1 On a balance sheet, assets will typically be classified into current assets and long-term
assets.
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Current asset
1 The current ratio is calculated by dividing total current assets by total current liability|current liabilities. It is frequently used as an indicator of a
company's liquidity, its ability to meet short-term debt|short-term
obligations.
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Notes receivable
1 'Notes Receivable' represents Cause of action|claims for which formal instruments of Credit (finance)|credit are issued as evidence
of debt, such as a promissory note. The credit instrument normally requires the
debtor to pay interest and extends for time periods of 30 days or longer. Notes
receivable are considered current assets if they are to be paid within 1 Luis Suarez|year,
and non-current if they are expected to be paid after one year.
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Revaluation of fixed assets - Upward revaluation
1 The law in Australia has been amended recently to allow for the
payment of dividends from the increase in value of non-current
assets in certain instances where a company meets other liquidity tests
(see section 254T of the Corporations Act 2001 (Cth)).
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Aldrich Ames - CIA response
1 By 1990, the CIA was certain that there was a mole in the agency and
recruitment of new Soviet agents came to a virtual halt from fear that
the agency could not protect its current assets.
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Accounting liquidity - Calculating liquidity
1 * The current ratio is the simplest measure and calculated by dividing the total current assets by the total current liabilities. A value of over 100% is normal in a non-banking
corporation. However, some current assets are more difficult to sell at full
value in a hurry.
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Accounting liquidity - Calculating liquidity
1 * The quick ratio is calculated by deducting inventories and
prepayments from current assets and then dividing by current liabilities, giving a measure of the ability to
meet current liabilities from assets that can be readily sold. A better way
for a trading corporation to meet liabilities is from cash flows, rather
than through asset sales, so;https://store.theartofservice.com/the-current-assets-toolkit.html
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IFRS 5
1 'IFRS 5' refers to the International Financial Reporting Standards
relating to Non-current assets held for sale and discontinued operations.
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Indian Accounting Standards - List of Indian Accounting Standards(IND ASs)
1 * Ind AS 105 Non current Assets Held for Sale and
Discontinued Operations *
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IAS 16 - Overview
1 The standard does not apply to assets classified as held for sale in accordance with
IFRS 5|IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and assets which require more specialised accounting,
such as biological (IAS 41|IAS 41 Agriculture), exploration and evaluation assets (IFRS 6|IFRS 6 Exploration for and Evaluation of Mineral Resources), mineral rights and
reserves such as oil, natural gas and similar non-regenerative resources.IAS 16.3
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Statement of Cash Flows - History and variations
1 Net Working Capital|Net working capital might be cash or might be the
difference between current assets and current liabilities
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Current liabilities
1 A more complete definition is that current liabilities are obligations that will be settled by current assets or by the creation of new current liabilities
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Current liabilities
1 One application is in the current ratio, defined as the firm's current
assets divided by its current liabilities. A ratio higher than one means that current assets, if they can all be converted to cash, are more than sufficient to pay off
current obligations. All other things equal, higher values of this ratio
imply that a firm is more easily able to meet its obligations in the coming
year.
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Quick ratio
1 In finance, the 'Acid-test' or 'quick ratio' or 'liquid ratio' measures the ability of a company to use its near cash or quick
assets to extinguish or retire its current liability|current liabilities immediately. Quick
assets include those current assets that presumably can be quickly converted to
cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently fully pay back its current
liabilities.https://store.theartofservice.com/the-current-assets-toolkit.html
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Debt ratio
1 'Debt Ratio' is a financial ratio that indicates the percentage of a
company's assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and
long-term liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as 'Goodwill (accounting)|goodwill').
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Line of credit - Cash credit in India
1 In India, banks offer 'cash credit' accounts to businesses to finance their working capital requirements (requirements to buy raw materials or 'current assets', as opposed to
machinery or buildings, which would be called 'fixed assets')
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Line of credit - Cash credit in India
1 Generally, a cash credit account is secured by a charge on the current
assets (inventory) of the organization. The kind of charge created can be either pledge or
hypothecation.[http://www.indiainbusiness.nic.in/investment/funding_optio
n.htm]
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Current ratio
1 The 'current ratio' is a financial ratio that measures whether or not a firm has enough resources to pay its
debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed
as follows:
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Current ratio
1 \mbox = \frac \mbox Current Assets
\mbox Current Liabilities
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Current ratio
1 If the current ratio is too high, then the company may not be efficiently using its current assets or its short-
term financing facilities
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ECache
1 The current assets backing eCache certificates are pure gold coins and the currency certificates are labeled
GG for “Gram of Gold”. A digital bearer certificate in the amount of 10GGs would have a value of 10
grams of gold.
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German colonization of Valdivia, Osorno and Llanquihue - Economic impact
1 Most German settlers that arrived to Valdivia did so with current assets, machinery or other valuable goods
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Nuffield Organisation - The British Motor Corporation Limited
1 ::Current assets £54.8 million
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Nuffield Organisation - The British Motor Corporation Limited
1 :::Net current assets £26.8 million
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Conrad N. Hilton Foundation - Financial information
1 The Foundation's current assets are approximately $2.2 billion. Since
inception, the Foundation has awarded more than $1 billion in
grants. Currently more than 50% supports international charitable
projects.
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Strip clubs - Financial trends
1 Strip clubs which practice Generally Accepted Accounting Principles| Generally Accepted Accounting
Principles (GAAP) typically report negative working capital, where current liabilities exceed current
assets
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SABIC - Fiscal performance
1 Net profits of SABIC in 2008 touched billion ( billion), while total assets
stood at billion ( billion) at the end of 2008 and the value of current assets at the end of 2008 stood at billion
( billion).[http://www.sabic.com/corporate/en/ourcompany/factsandfigures/
financialperformance.aspx SABIC.com] The Fortune 500 ranking
set SABIC revenues as of $40.2 billion.
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