Posts Tagged ‘current liability’

Operating Cash Flow Defined

Businesses often focus in on net income and fail to recognize the significance of cash flow (see Cash Flow – The Bottom Line) and what determines cash flow (see Cash Management-It’s Not About the Cash Account). Even when understanding the importance of cash flow and what generates it, there are some additional aspects to understand.

What is Operating Cash Flow

In a future blog I will show how the cash flow statement is created, but for now let’s just identify the three main components of the statement, which are: Read the rest of this entry »


Importance of Liquidity

In my last three posting, Necessity of Working Capital, The Current Ratio Matters and Quick Ratio Analysis we looked at three ways to asses a company’s liquidity. While working capital, the current ratio, and the quick ratio are useful liquidity measures, they may need some refinement. Let’s dig a little deeper and try to understand more about the importance of liquidity and why just the basic calculation of any of these may not be as helpful as we may have first thought. Read the rest of this entry »


Quick Ratio Analysis

In the postings Necessity of Working Capital and The Current Ratio Matters we looked at the importance of having adequate working capital and a couple of ways of assessing a company’s working positions. In addition to the actual dollar amount of working capital and the current ratio, there is another liquidity measure, the Quick Ratio.

Quick Ratio

The quick ratio analysis is a way to look at liquidity that is a little more stringent in what are considered liquid assets. Unlike the current ratio that includes all current assets in the calculation of the ratio, the quick ratio Read the rest of this entry »


The Current Ratio Matters

In the posting Necessity of Working Capital we looked at the importance of having adequate working capital. For that purpose we considered how working capital is calculated and how the amount can impact a business for good or bad. Now let’s look at working capital a different way.

Current Ratio

The current ratio is really just another way of analyzing working capital. The calculation is simply Read the rest of this entry »


Necessity of Working Capital

No business can continue to operate if they don’t pay their bills. Because of that it is important to keep tabs on your company’s ability to pay bills on time. There are several financial indicators of this ability, among them being the quick ratio, current ratio, and working capital. For now let’s look at the necessity of working capital.

A Definition

The definition of working capital is simply Read the rest of this entry »


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