Task Team of FUNDAMENTAL ACCOUNTING School of Business Sun Yat-sen University Accounts Payable to Sales (%): This ratio is obtained by dividing the 'Accounts Payables of a company by its 'Annual Net Sales. This ratio gives you an indication as to how much of their suppliers money does this company use in order to fund its Sales. Higher the ratio means that the company is using its suppliers as a source of cheap financing. The working capital of such companies could be funded by their suppliers The formula Accounts Payables to Sales Ratio=[Accounts Payables /Net Sales ]x 100 iquidity analysis ratios, which help analyze a company' s ability to generate cash or other highly liquid assets in order to extinguish debt or allocate resources. These ratios are important in measuring the ability of a company to meet both its short term and long term obligations Main liquidity ratios and the formula: Current Ratio: This ratio is obtained by dividing the Total Current Assets of a company by Its Total Current Liabilities!. The ratio is regarded as a test of liquidity for a company. It expresses the working capital relationship of current assets available to meet the company s current The formula Current ratio Total Current Assets/ Total Current liabilities Quick Ratio: This ratio is obtained by dividing the Total Quick Assets of a company by Total Current Liabilities. Sometimes a company could be carrying heavy inventory as part of its current assets, which might be obsolete or slow moving. Thus eliminating inventory from current assets and then doing the liquidity test is measured by this ratio. The ratio is regarded as an acid test of liquidity for a company. It expresses the true working capitalrelationship of its cash, accounts receivables, prepaid and notes receivables available to meet the company's current Quick Ratio= Total Quick Assets/ Total Current Liabilities Quick Assets= Total Current Assets(minus) Inventory Long-term debt-paying ability analysis ratios, which measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time.Task Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University Accounts Payable to Sales (%): This ratio is obtained by dividing the 'Accounts Payables' of a company by its 'Annual Net Sales'. This ratio gives you an indication as to how much of their suppliers money does this company use in order to fund its Sales. Higher the ratio means that the company is using its suppliers as a source of cheap financing. The working capital of such companies could be funded by their suppliers. The formula: Accounts Payables to Sales Ratio = [Accounts Payables / Net Sales ] x 100 Liquidity analysis ratios, which help analyze a company's ability to generate cash or other highly liquid assets in order to extinguish debt or allocate resources. These ratios are important in measuring the ability of a company to meet both its short term and long term obligations. Main liquidity ratios and the formula: Current Ratio: This ratio is obtained by dividing the 'Total Current Assets' of a company by its 'Total Current Liabilities'. The ratio is regarded as a test of liquidity for a company. It expresses the 'working capital' relationship of current assets available to meet the company's current obligations. The formula: Current Ratio = Total Current Assets/ Total Current Liabilities Quick Ratio: This ratio is obtained by dividing the 'Total Quick Assets' of a company by its 'Total Current Liabilities'. Sometimes a company could be carrying heavy inventory as part of its current assets, which might be obsolete or slow moving. Thus eliminating inventory from current assets and then doing the liquidity test is measured by this ratio. The ratio is regarded as an acid test of liquidity for a company. It expresses the true 'working capital' relationship of its cash, accounts receivables, prepaids and notes receivables available to meet the company's current obligations. The formula: Quick Ratio = Total Quick Assets/ Total Current Liabilities Quick Assets = Total Current Assets (minus) Inventory Long-term debt-paying ability analysis ratios, which measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm’s ability to raise additional debt and its capacity to pay its liabilities on time