WGU C201 Business Acumen Chapter 15
& 16: Accounting and Financial
Statements – Ratios
Current assets / current liabilities ✔✔Current Ratio
Current assets - minus inventory / current liabilities ✔✔Acid Test (Quick) Ratio
Current assets $250
Inventory $20
Current Liabilities $100
250-20=230
230/100=2.2
$2.20 assets for every $1 in liabilities
Acid Test (Quick) Ratio and Current Ratio ✔✔Liquidity Ratios
Inventory Turnover, Receivables Turnover, and Total Asset Turnover ✔✔Activity Ratios
Cost of goods sold / average inventory ✔✔Inventory Turnover.
Equals the number of times inventory moves through a business.
Cost of Goods Sold $200,000
Average Inventory $20,000
200000/20000 = 10
Compare these to industry averages for industry.
Credit sales / average accounts receivable ✔✔Receivables Turnover
Sales / Average Total Assets ✔✔Total Asset Turnover.
Equals how much sales each dollar invested in assets generates.
& 16: Accounting and Financial
Statements – Ratios
Current assets / current liabilities ✔✔Current Ratio
Current assets - minus inventory / current liabilities ✔✔Acid Test (Quick) Ratio
Current assets $250
Inventory $20
Current Liabilities $100
250-20=230
230/100=2.2
$2.20 assets for every $1 in liabilities
Acid Test (Quick) Ratio and Current Ratio ✔✔Liquidity Ratios
Inventory Turnover, Receivables Turnover, and Total Asset Turnover ✔✔Activity Ratios
Cost of goods sold / average inventory ✔✔Inventory Turnover.
Equals the number of times inventory moves through a business.
Cost of Goods Sold $200,000
Average Inventory $20,000
200000/20000 = 10
Compare these to industry averages for industry.
Credit sales / average accounts receivable ✔✔Receivables Turnover
Sales / Average Total Assets ✔✔Total Asset Turnover.
Equals how much sales each dollar invested in assets generates.
