Ideas in this flowchart

• A firm’s assets, liabilities, and liquidity ratios
• Assets are things of value owned by a firm.
• Current assets can or will be converted to cash within the next 12 months.
• Fixed assets are long-term assets used by a firm for more than a year.
• Examples of fixed assets include land, buildings, and machinery.
• Liabilities are claims against a firm’s assets.
• Current liabilities are short-term claims due within one year of the balance-sheet date.
• Liquidity ratios measure a firm’s liquidity.
• The current ratio equals total current assets divided by total current liabilities.
• The acid-test, or quick, ratio equals current assets excluding inventory divided by total current liabilities.