Money you owe to your suppliers and vendors. Part of Current Liabilities.

Money your customers owe to you. Part of Current Assets.

Event-based accounting which recognizes events when they appear in the system, not at the time they are paid.

See also Cash Basis.

Ratio: (Current Assets less Inventory) divided by Current Liabilities

This is a variant of the Current Ratio; it only includes items which are quickly converted into current assets. It is called ‘Acid-Test’ because it measures the ability to meet unexpected demands without depending on the sale of inventory.

Also called Quick Ratio. A Quick Ratio of 1 is a good benchmark. Higher ratios indicate a satisfactory condition. Decreasing ratios indicate either a deteriorating cash position or a deteriorating demand for products. Ratios below ½ indicate a potentially severe situation like slow moving inventory and a higher chance of bankruptcy.

Decreasing an amount gradually or in installments, to:
1. Write down an expenditure.
2. Pay off a loan.
3. Reduce the value of an intangible asset in a manner analogous to Depreciation.

1. (Owner’s view) Buying a company when its market value is below book value, then selling off its component assets to make a profit.

2. (Manager’s view) Selling off non-essential or under-utilized Assets of a business in order to improve short-term metrics such as Return On Assets (ROA).

Ratio: Sales divided by Assets

This ratio measures how asset-intensive a business is and the efficiency of the assets employed.

Asset Turnover shows the speed with which an amount of cash, equivalent to the money tied up in the business, comes back in through the door in fresh sales. It isn’t concerned with profit, only with cash flow. If sales are rapid, little cash is tied up to keep the business going; which may make it easier to expand.

Also called Asset Turns.

See also Income/Outcome Triangle for Ratio Analysis, Return On Assets (ROA), Net Asset Turnover.

See Asset Turnover (ATO)

Anything owned by the business.

On the Balance Sheet, the sum of the Assets equals the sum of Liabilities and Equity.

See Days Sale Outstanding (DSO)

A summary of the Assets, Liabilities, and Equity for the business at a certain point in time - it gives a financial snapshot for the given moment.

The left side of the Company Board (and of the Income/Outcome business simulation game board) is a Balance Sheet.

When using a numeric format, North America uses a Total Asset Balance Sheet which shows the assets (what you have in the business) and balances that amount against the total of liabilities and equity (which is where the assets came from). In other words, everything you have in the business comes from investing (Capital Stock), making money (Retained Earnings), or borrowing from sources such as banks (Loans) and suppliers (Accounts Payable (A/P)). Elsewhere in the world, a Total Asset Balance Sheet may be used.

See also Income Statement.

Calculation: Purchase value of Fixed Assets less accumulated Depreciation.

This is the value of fixed assets as they are listed on the Balance Sheet.

Calculation: Total Assets less Intangible Assets less Liabilities.

The Net Asset Value of a company.

Calculation: Book Value of Business divided by Number of Shares