3/13/2024 0 Comments Accounts payablecogs![]() The formula is:Quick Ratio = ( Current Assets – Inventory) / Current Liabilities It measures the company’s ability to meet its short-term obligations using only its most liquid assets. Quick Ratio (Acid-Test Ratio): This ratio is a more stringent measure of a company’s liquidity, as it excludes inventory from current assets.The formula is:Current Ratio = Current Assets / Current Liabilities A higher current ratio indicates better liquidity and the ability to meet short-term obligations. Current Ratio: This ratio measures a company’s ability to pay its short-term liabilities with its short-term assets.The formula is:DPO = (Accounts Payable / Cost of Goods Sold) x Number of Days in the Period A higher DPO indicates that the company takes longer to pay its suppliers, which might be a sign of cash flow problems or holding onto cash as long as possible. Days Payable Outstanding (DPO): This ratio calculates the average number of days it takes for a company to pay its suppliers.The formula is:Accounts Payable Turnover Ratio = Cost of Goods Sold (COGS) / Average Accounts Payable A higher ratio indicates that the company pays its suppliers more quickly, while a lower ratio suggests it takes longer to pay its bills. ![]()
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