Statement Analysis Tools and Accounting Ratios Test - 10

Ideal is 2:1. A high ratio indicates under trading and over capitalisation and vise versa.

This ratio attempts to measure a company's ability to pay off its short term debt obligations. This is done by comparing a company's most liquid assets, those that can be easily converted to cash, with its short term liabilities

Quick assets include a company's most liquid assets which can be easily converted into cash. Inventories have less liquidity and therefore not included in quick assets.

Indicates that a business is investing in too many accounts receivable and inventory assets to support its sales , which could eventually lead to an excessive amount of bad debts and obsolete inventory.

It is an accounting term that refers to a situation where a business has overpaid taxes or taxes paid in advance on its balance sheet. 

Payment of outstanding liabilities will decrease cash balance and outstanding liabilities balance also. So both current assets and liabilities will decrease

Is a process of reviewing and analysing a company's financial statements to make better economic decisions.so it can be termed as a post mortem

Shareholders as investors, banks, financial institutions, material suppliers, govt dept  and tax authorities are doing external analysis using published financial statements. While internal analysis is done by the top management with the help of management accountant..

External analysis is done by shrehoders as investors, banks and other financial institutions with the help of published financial reports of the company. 

Assets which can be easily converted into cash can be termed as quick assets. Loose tools having least liquidity