Problem
A. Put the following assets in order of liquidity: accounts receivable, inventory, cash, and marketable securities.
B. Describe the difference between the Excess of Revenues over Expenses and the Increase in Unrestricted Net Assets.
C. Why must organizations disclose their accounting policies in the notes to the financial statements?
D. Describe three different types of benchmarks used in ratios.
E. What are common size ratios? What is the key number (or numbers) used for comparison for balance sheet ratios and statement of operations ratios? In what numerical format are these ratios typically presented (or converted to)? Why?
F. What is the general purpose of liquidity ratios? Define the three major types of liquidity ratios. Why might too much liquidity be a problem for an organization? Why might too little be a problem?
G. What is the general purpose of efficiency ratios? What are the three major types of efficiency ratios and how are these used?
H. What is a solvency ratio and how is it used?
I. What is a profitability ratio and how is it used?
J. Describe the various types of return on investment ratios and how they are used.