Chapter 11 Current Liabilities and Payroll Accounting Essay

1. Liquidity ratios are a class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

The liquidity of firm can be measured by computing certain ratio’s such as current ratio and acid ratio. For measuring Target Corporation’s 2014 liquidity; the firm’s current ratio and the acid ratio is computed. The company’s current ratio is 0.91 times which is computed by comparing current asset ($11, 573,000) with current liabilities ($12,777, 000) of the year 2014 (TGT Company Financial, n.d). The firm’s acid ratio is 0.26 times which is computed by deducting inventory ($8,278,000) from current assets. The inventory is deducted from current assets because the company has not received any money for the unfinished good or from unsold inventory worth ($8,278,000). To analyze the Target Corporation’s liquidity trend in 2014; the current ratio and acid ratio of 2014 is compared with the 2015’s ratios. In 2015, the firm’s current ratio was 1.20 times and the acid ratio was 0.45 times. These liquidity ratios reflect that the firm’s liquidity was better in 2015 than 2014. (See Table 1).

CHAPTER 7 Transaction No. 11 |FEDERAL DEPOSIT INFORMATION WORKSHEET | | | | |Employer | | |Identification Number 31-0450660 |Name Glo-Brite Paint Company | |Month Tax Year Ends 12 |Amount of Deposit 6443.08 | |Type of Tax (Form) 941

f) To evaluate the material misstatement in the accounts, I think both of the consolidated income statement and the three financial statements are useful. We need to use the information properly from all the financial statements. However the consolidated income statement is the most useful one. If there is a significant change in an account balance comparing with preceding two years, the auditor will examine whether there a material misstatement exists. For instance, the bad debt expense as a percent of net sales in 2011, 2010 and 2009 are 0.56%, 0.70% and 0.69%, respectively. There should

According to the fact of this case, Parent Co. (Parent) wholly owns Poor Son Co. (Poor Son) as a legal subsidiary, and both of them all nonpublic companies. However, in January 2007 Poor Son filed a voluntary bankruptcy under Chapter 11 of the U.S. bankruptcy code because of its inability of meet obligations as they became due. Then, Parent claimed the loss of control of Poor Son and deconsolidated Poor Son from its financial statement. Through the bidding process in May 2009, Poor Son and OtherCo, the winning sponsor, filed a joint plan of reorganization to the bankruptcy court, but the plan was rescinded by OtherCo later due to significant market value shrink of Poor Son. After that, the

Liquidity ratios measure how well a company is able to meet its short term obligations without relying on selling inventory (David, Fred). Starbucks three main components in these current categories are cash, inventory and accrued liabilities. The current ratio indicates that if Starbucks needed to liquidate they would be able to cover their current liabilities. They would be unable to meet their outside obligations without selling off inventory to

These ratios are computed to judge the short term liquidity of the business. Two most important liquidity ratios are current ratio and quick ratio. These ratios determine the ability of firm to meets its current liabilities out of its current/quick assets.

Liquidity represents a company’s ability to pay its short-term obligations. In the following schedule is the calculation of the ratios that are indicators of the liquidity position of a company.

Liquidity ratio. The firm’s liquidity shows a downward trend through time. The current ratio is decreasing because the growth in current liabilities outpaces the growth of current assets. The quick ratio is also declining but not as fast as the current ratio. From 1991 to 1992, it only decreased 0.35 units while the current ratio decreased 0.93 units. Looking at the common size balance sheet, we also see that the percentage of inventory is growing from 33% to 48% indicating Mark X could not convert its inventory to cash.

Liquidity ratios measure the short term ability of a company to pay its obligations and meet their needs for maintaining cash. According to Cagle, Campbell & Jones (2013), “A good assessment of a company’s liquidity is important because a decline in liquidity leads to a greater risk of bankruptcy” (p. 44). Creditors, investors and analysts alike are all interested in a company’s liquidity. After computing liquidity

Liquidity ratios measure the ability of a firm to meet its short-term obligations. A company that is not able

Liquidity is an important factor in financial statement analysis since an entity that can not meet its short term obligations may be forced into liquidation. The focus of this aspect of analysis is on working capital, or some computer of working capital.

The liquidity position of a company can be evaluated using several ratios which evaluate short-term assets and liabilities and a firm’s ability to settle short-term debts (Gibson, 2011). These ratios can provide insight into a firm’s ability to repay its debts in the short term (Gibson, 2011). In turn they suggest a firm’s capacity for debt-satisfying capabilities into the future (Gibson, 2011). This paper will use financial statement data as cited in Gibson (2011) from 3M Company (3M) to better understand liquidity measures to evaluate a firm’s total liquidity position. The following paper will focus on various liquidity calculations, their meaning, and their interpretation relative to 3M. Finally, an overall view of 3M’s liquidity

Task: Using your own work area as the subject for study assess the effectiveness of the payroll procedures with in the organization that are used to administrate the payroll function and provide information to clients

These ratios help company in determining its capability to pay short-term debts. Liquidity ratios inform about, how quickly a firm can obtain cash by liquidating its current assets in order to pay its liabilities. General liquidity ratios are: current ratio and quick ratio. Current ration can be obtain by dividing company’s current assets by its’ current liabilities. Generally a current ratio of two is considered as good (Cleverley et al., 2011). Quick ratio also known as acid test determines company’s liabilities that need to be fulfilled on urgent basis. Quick ratio can be obtained by dividing quick assets by current liabilities. Quick ratio is considered as stricter because it excludes inventories from current assets. Generally a quick ratio of 1:1 is considered as good for the company. Higher quick