It was revealed that the Kovur Cooperative Sugar Factory maintained current ratio below the standard norms, and the cash and bank balance when compared to
current assets were low.
Going back to the example of the trading firm, that portion of its total debt which is covered by
current assets is self-liquidating.
As can be seen in the Table, the share taken by
current assets item from active assets in 2005-2008 seems to gradually increase on a pro rata basis.
If the premise is accepted that CPLTD is repaid from CPFA and not from
current assets, it must follow that the current ratio is flawed by including CPLTD as a current liability that must be paid from
current assets.
If a firm's
current assets are large relative to the value of current liabilities, there is a high probability that the firm can pay the liabilities as they come due.
For this purpose ratio of raw materials to
current assets, work-in-progress to
current assets, finished goods to
current assets are examined.
To the extent that the turnover of the firm's
current assets is greater than the turnover of the firm's current liabilities, the CLI will be greater than the standard current ratio.
To many companies,
current assets are more important than fixed assets.
Montclair Medical Associates Statement of assets and liabilities--modified cash basis December 31, 1994 Assets
Current assets Cash $600,000 Prepaids 2,000
The new standard would begin by combining parts of IAS 1, Disclosure of Accounting Policies, IAS 5, Information to Be Disclosed in Financial Statements, IAS 13, Presentation of
Current Assets and Current Liabilities, other existing standards and the IASC Frame-work for the Preparation and Presentation of Financial Statements.
At the end of fiscal year ended June 30, 2006, the Company had $201,845 of
current assets and $458,474 of current liabilities compared to $107,715 in
current assets and $276,748 in current liabilities for fiscal year 2005.
The purchase price is subject to adjustment dependent upon Valence's net
current assets as of June 30, 2006 as determined by the parties' auditors.
