Overview: Introduction to the General-Purpose Financial Statements (Part E Liquidity, Solvency and Efficiency Ratios)

Overview: Introduction to the General-Purpose Financial Statements (Part E - Liquidity, Solvency and Efficiency Ratios)

In this module we will learn how to use the classified, comparative balance sheet and the income statement to compute some liquidity, solvency, and efficiency ratios.  These ratios help us look beyond the face of the financial statements and better assess the company's financial health.

Liquidity is the ability of a company to pay its short-term liabilities as they come due.  I used the image of a water faucet to the right just to help remind you of the concept of liquidity.  Imagine that the water is the company's assets converting into cash so the company can pay off its liabilities.

Solvency is the ability of a company to pay all of its liabilities as they come due, particularly its long-term liabilities.

Efficiency is the ability of the company to use the least amount of resources while striving to achieve the company's objectives.

Some of the videos in these topics are copies from prior lessons, so, if you already feel that you understand the material, just do a quick review, move on and take the quizzes.  I bet you will do great.

To Complete This Module

To complete this module, you will need to study all of the content pages and successfully complete the related topic and module quizzes. To successfully complete quizzes you need to achieve a score of at least 4 out of 5 for topical quizzes and achieve a score of at least 8 out of 10 for the module quiz. You may take and re-take quizzes as many times as necessary to master the material and get your passing score.

To track which content pages you have viewed and which quizzes you have successfully completed, click the "Modules" link on the course menu on the left.  A green check mark will appear to the left of each “Study” page that you have viewed and by each “Quiz” that you have successfully completed in the module. 

I anticipate that this module will take about 2 hours to complete.

Once you have completed mastering the material in Modules 6-10, you should move on and take Exam #2 which includes 40 questions from Modules 6-10.