tailieunhanh - Accounting For Dummies 4th Edition_12

Tham khảo tài liệu 'accounting for dummies 4th edition_12', tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 288 Part IV Preparing and Using Financial Reports The business example in Figure 13-2 has two quick assets million cash and million accounts receivable for a total of million. If it had any short-term marketable securities this asset would be included in its total quick assets. Total quick assets are divided by current liabilities to determine the company s acid-test ratio as follows 57 350 000 quick assets - 58 855 000 current liabilities .97 acid-test ratio Its .97 to acid-test ratio means that the business would be just about able to pay off its short-term liabilities from its cash on hand plus collection of its accounts receivable. The general rule is that the acid-test ratio should be at least which means that liquid quick assets should equal current liabilities. Of course falling below doesn t mean that the business is on the verge of bankruptcy but if the ratio falls as low as that may be cause for alarm. This ratio is also known as the pounce ratio to emphasize that you re calculating for a worst-case scenario where a pack of wolves known as creditors could pounce on the business and demand quick payment of the business s liabilities. But don t panic. Short-term creditors do not have the right to demand immediate payment except under unusual circumstances. This ratio is a very conservative way to look at a business s capability to pay its short-term liabilities too conservative in most cases. Return on assets ROA ratio and financial leverage gain As I discuss in Chapter 5 one factor affecting the bottom-line profit of a business is whether it uses debt to its advantage. For the year a business may realize a financial leverage gain meaning it earns more profit on the money it has borrowed than the interest paid for the use of that borrowed money. A good part of a business s net income for the year could be due to financial leverage. The first step in determining financial leverage gain is to calculate a business s return on