BUSINESS FINANCE

Activity No. 2

March 24, 2021

FILL IN THE BLANKS

_________1. The firm's ability to pay short-term debt and expenses (aka current liabilities) within the
one-year operating cycle.

_________2. The difference between a company's current assets, such as cash, accounts receivable
(customers' unpaid bills) and inventories of raw materials and finished goods, and its current liabilities,
such as accounts payable. ( Current Assets- Current Liabilities )

_________3. A fair indication the firm has the financial ability to pay off its short-term debt.

_________4. Temporary investments of excess cash.

_________5. Assets that consume working capital, such as loans, including unsettled transactions and
debts, extended to customers.

_________6. Future expenses that have already been paid (i.e.: insurance premium, rent).

_________7. A longer term funds commitment (i.e.: stocks, bonds)

_________8. Amount owed on supplier accounts; money owed by a business to its suppliers shown as a
liability on a company's balance sheet.

_________9. Signed obligations owed to creditors.

_________10. Service provided that has not yet been paid.

_________11. The "liquidity ratio." It is a measure of the firm's ability to pay its short-term debt.

_________12. Is referred to as the Collection Ratio, because it considers the average number of days, or
amount of time, the receivable were outstanding – the collection period.

_________13. It is an indicator of how quickly inventory is turned over, and gotten off their shelves, or
how many times during the year period the inventory has been sold.

_________14. Is also called the average collection period. It is used to appraise accounts receivable ; the
average time the firm must wait after making a sale before receiving cash. The average daily sales is
divided into accounts receivable to determine the number of days sales were tied up in receivables.

_________15. Is a measure of working capital efficiency relative to the firm's short-term financial plan;
measures the average number of days working capital is tied up in operations.

_________16. Is a financial statement that reports a company's assets, liabilities and shareholders'

equity at a specific point in time, and provides a basis for computing rates of return and evaluating its
capital structure.