Examples of current liabilities in the following topics:
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- Acceptable current ratios vary from industry to industry.
- If current liabilities exceed current assets (i.e., the current ratio is below 1), then the company may have problems meeting its short-term obligations.
- If the current ratio is too high, the company may be inefficiently using its current assets or its short-term financing facilities.
- Low values for the current or quick ratios (values less than 1) indicate that a firm may have difficulty meeting current obligations.
- A firm may improve its liquidity ratios by raising the value of its current assets, reducing the value of current liabilities, or negotiating delayed or lower payments to creditors.
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- Current Ratio = Current Assets / Current Liabilities = 5,240/3,500 = 1.497
- Quick Ratio = (Current Assets-Inventories) / Current Liabilities = (5,240 - 2,010) / 3,500 = 0.923
- Despite having a current ratio of about 1.0, the quick ratio is slightly below 1.0.
- This means that the company may face liquidity problems should payment of current liabilities be demanded immediately.
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- Examples of current liabilities include wages, taxes, accounts payables, and short-term obligations (such as purchase from suppliers).
- A liability is defined by the following characteristics:
- Current liabilities: these liabilities are reasonably expected to be liquidated within a year.
- Long-term liabilities: these liabilities are reasonably expected not to be liquidated within a year.
- Liabilities of the United States as a fraction of GDP (1960-2009)
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- If Company F has $100,000 in assets, and $10,000 in total liabilities, it would have a debt ratio of 10,000 / 100,000 = 10%.
- Company G, on the other hand, may have $100,000 worth of assets and $200,000 worth of liabilities.
- 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").
- For example, a company with $2 million in total assets and $500,000 in total liabilities would have a debt ratio of 25%.
- D/E = Debt(liabilities)/Equity.
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- Asset accounts: represent the different types of economic resources owned by a business, common examples of asset accounts are cash, cash in bank, equipment, building, inventory, prepaid rent, goodwill, accounts receivable.Assets are usually broken down into three categories: Current assets, fixed assets, and intangible assets.
- Current assets are assets which could be converted to cash fairly quickly if necessary, certainly in less than a year.Examples of current assets include cash, cash in bank, inventory, prepaid rent, and accounts receivable.Fixed assets are assets of a more permanent nature like manufacturing equipment, buildings owned, and the like.Intangible assets, like goodwill, are monetary values assigned to intangibles like a brand name.It is typically used when accountants need to justify the purchase price of one company by another when the price cannot be justified by the monetary value of the purchased company's assets minus liabilities.Intangible assets are beyond the scope of this chapter as they apply more to larger corporations than to a start-up business.
- Liability accounts: represent the different types of economic obligations by a business, such as accounts payable, bank loan, bonds payable, accrued interest.Current liabilities are liabilities which are scheduled to be paid within a short period of time, usually less than a year.Examples of current liabilities include accounts payable to creditors, like suppliers, current amounts payable to employees (payroll) and interest due on short term loans.Long-term liabilities (sometimes called fixed liabilities) are liabilities of a more permanent nature like loans that are not due in the current year (long-term debt), and the like.
- Equity accounts: represent the residual equity of a business (after deducting from assets all the liabilities).In the case of a start-up company totally financed by the founder, it is often called owner's equity and represents the capital provided by the owner.If the company is a corporation and stock has been issued to the owner and to others, it is often called stockholders' equity.
- Setting up an appropriate chart of accounts will take some careful thought on your part because you want to be sure that accounts are set up in each category (i.e. assets liabilities, etc. ) that will enable you to accumulate accounting transactions in a meaningful way.
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- Tangible assets contain various subclasses, including current and fixed assets.
- Current assets include inventory, while fixed assets include such items as buildings and equipment.
- That is, the total value of a firm's assets are always equal to the combined value of its "equity" and "liabilities. " In other words, the accounting equation is the mathematical structure of the balance sheet.
- Assets and liabilities of the US as a fraction of the GDP 1945-2009.
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- A balance sheet demonstrates the overall value of organizational assets by listing current and long-term assets (fixed or otherwise) alongside short term and long term liabilities and stakeholder equity.
- Through balancing the assets against the combination of liabilities and stakeholder equity, the financial accounting should encounter a zero sum game.
- Simply put: Assets = Liabilities + Shareholder Equity.
- The items on a balance sheet can range from long term debt to current inventory to dividends to accounts receivable to cash on hand.
- This is more of a chronological statement, as it takes the previous pay period and the current pay period, and identifies the difference in overall available cash.
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- This Alert provides highlights of the new law and the effect it will have on employees' rights and their employer's legal liability.
- Certain articles in the new law will establish increased legal liability and possible criminal charges for employers whose actions cause an employee to suffer harm, such as:
- A contractor hiring employees in violation of the law who suffer harm will result in joint liability for the organization that employed such contractor and the contractor.
- Negligence on the part of a labor administration authority to act in accordance with the law will also result in them bearing liability.
- Therefore, all companies, including foreign companies who have invested in local subsidiary or representative offices in the PRC should re-examine their local and master directors' and officers' liability policies, as well as any employer's liability exposures and relevant local or global policies.
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- Funds typically originate from company sales and earning revenue; other cash sources include the sale of non-current assets and company stock.
- However, a business can also generate cash funds from other sources as well, such as the sale of non-current assets and through the sale of company stock.
- Cash inflows from investing activities involve cash flows associated with non-current assets:
- Sale of a non-current asset (assets, such as land, building, equipment, marketable securities, etc.)
- Other activities which impact long-term liabilities and equity of the company are also listed under financing activities, such as:
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- For the purpose of this discussion, the most important types of partnerships to consider are general partnerships, limited partnerships, joint liability partnerships, several liability partnerships, and limited liability partnerships.
- As opposed to a several liability concept, in which liability may be distributed based on certain proportionate responsibility, joint liability partnerships are equal across the board.
- Several liability is the converse to joint liability, in which the involved parties will settle liability disputes based on respective obligations.
- But how much liability does each party deserve?
- Finally, there are limited liability partnerships (LLPs).