ACC 345 Module Two Summary Template (1)

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Southern New Hampshire University *

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345

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Accounting

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Apr 30, 2024

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ACC 345 Module Two Summary Template 1. Define the measurement of each type of ratio and the accounts included in the calculation. Refer to the Ratios tab. Regarding the measurement of ratios in the spreadsheet they are separated into four different sections. These sections are labeled as liquidity, activity, coverage/leverage, and profitability ratios. Liquidity is made up of current, quick, and working capital ratios. Current ratios are calculated by dividing current assets by current liabilities. Quick ratios are calculated by taking cash and cash equivalent adding them to A/R and dividing that by total current liabilities. The working capital ratio is calculated by subtracting total current liabilities from total current assets. Activity Ratios: Receivable Turns – total revenue divided by accounts receivable net. Days in Receivable – days in a year divided by receivable turns. Revenue/Working Capital – total revenue divided by the working capital. Revenues/Fixed Assets – total revue divided by property, plant, and equipment. Revenues/Total Assets – total revenue divided by total assets. Inventory Turns – inventory divided by cost of sales. Days in Inventory – days in a year divided by inventory turns. Payables Turns – cost of sales divided by accounts payable. Days in Payables – days in a year divided by payables turns. Coverage/Leverage Ratios: Fixed Assets /Equity – PP&E divided by total equity. Profitability Ratios: Return on Equity – net income (loss) before tax divided by total equity. Return on Total Assets – net income (loss) before tax divided by total assets. Net Profit on Revenues – net income (loss) before tax divided by total revenue. 2. Explain the significance of each ratio to the company. Ratios in liquidity are important because they are used to assess/evaluate a company’s ability to settle any short-term loans. This also signifies if a business can handle its liquid and pay off their debts. Activity ratios are extremely important because they signify how well the company can utilize its assets to produce revenue. This is important for any audience and can help gauge the financial health of the company. Coverage/leverage ratios are used to determine how company obligations are used to finance its assets. Lastly, profitability ratios are used to evaluate the company’s ability to generate profit, and this is highlighted to its audience as the better this is the more edge they have over competition.

3. Identify an asset or liability being measured at fair value. Provide the specific disclosure note(s). Include the citation(s). One example of an asset being measured at fair value would be intangibles. “Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement (SEC).” 4. Provide the classification for the GAAP rule that allows the fair value measurement. The GAAP classification that allows for fair value measurement is ASC 820 References Include any references used to complete this assignment. This section is for the full citation. Sources should be cited using APA style. Inline XBRL Viewer. (n.d.). https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata %2F0000320187%2F000032018722000038%2Fnke- 20220531.htm#i46e4e3c717064a3ca53a7fe9eaaaeca4_127 NKE-20210531. (n.d.). https://www.sec.gov/Archives/edgar/data/320187/000032018721000028/nke- 20210531.htm#ibe46f16d2db0431aa4fa39b5b30b6f15_127 FASB Accounting Standards Codification®. (n.d.). https://asc.fasb.org/Home

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