Answer to Question #134452 in Finance for Josephine

Question #134452
If the balance sheet of a business shows positive equity, but is short on cash, but has a large accounts receivable balance, what would you suggest to the owner to ensure that the company can pay its liabilities on time?
1
Expert's answer
2020-09-23T10:14:13-0400

What the owner should do to ensure that the company pays its liabilities on time is by checking the company's liquidity levels if it has a negative book value. To quickly check on the liquidity one should subtract the short term assets by the short term liabilities. This means that it is the calculation of the working capital which shows how much money has readily available to pay its upcoming bills. Some important ratios that can help in quickly assessing the liquidity are; quick ratio, current ration and the working capital turnover.


Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS