ACC 205 Week 1

Balance Sheet Journal

Balance Sheet Ratios

Balance sheet ratios

The important ratios that arise from the Balance Sheet include working capital, liquidity, net worth, debtors turnover, return on assets and return on investment.

Working capital ratio

This ratio is also known as "the current ratio", and is one of the best-known measures of financial strength. The main question this ratio addresses is: "Does your business have enough current assets to meet the payment schedule of its current debts with a margin of safety for possible losses in current assets, such as stock shrinking or uncollectable debtors?"

A generally acceptable current ratio is 2:1; but whether or not a specific ratio is satisfactory, depends on the nature of the business and the...