DoD Financial Management Regulation Volume 13, Appendix C APPENDIX C ACCOUNTING ...

92 Pages·1996·0.44 MB·English

DoD Financial Management Regulation Volume 13, Appendix C
APPENDIX C
ACCOUNTING PROCEDURES FOR NAVY NONAPPROPRIATED FUND
This appendix of the DoD Financial
Management Regulation is for use by all non-
appropriated fund accounting offices which use
systems developed by the Department of Navy.
The appendix contains policies and procedures
specifictothosesystems. Generalornon-system
specific policies and procedures are included in
thecoreregulationandhavebeenexcludedfrom
this appendix. For example, the requirement
that nonappropriated fund instrumentalities
(NAFIs) conform to generally accepted
accounting principles is not system-specific and
applies to all DoD NAFIs. Therefore, it is
included in the core regulation and excluded
from this appendix.
Thisappendixsupersedesallpreviously
publishedpoliciesandprocedures. Therefore,in
the event of conflicting instructions, the policies
andproceduresintheregulationitselfshouldbe
followed.
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Volume 13, Appendix C DoD Financial Management Regulation
CHAPTER 1
GENERAL INFORMATION
C0101 GENERAL outside the scope of any official capacity as
officers, employees, or agents of the
C010101 Purpose. This appendix Government, and which are established to
prescribes financial management policies and a providedesirablemoraleenhancingfacilitiesand
uniform accounting system for all services, are subject to DOD guidelines. The
nonappropriatedfundswithintheDepartmentof financial management policies and procedures
the Navy. These provisions are intended to set forth in this appendix are not applicable to
increase efficiency and effectiveness, permit privateorganizations,however,theymaybeused
greater control by management, facilitate the as guidelines.
conducting of audits by proper authority, and
provide guidance to all participants in the C. This appendix is not
system. intended to approve the establishment or
operation of any of the activities referred to
C0102 SCOPE herein. Military and civilian NAFIs are
established and operated in accordance with
C010201 Policies. instructions issued by the applicable program
manager.
A. Scope. The policies set
forthhereinareapplicableonaworldwidebasis C010202 Basic Policies.
to all nonappropriated fund instrumentalities
(NAFIs) within the Department of the Navy, A. Establishment and
including the Navy and Marine Corps Morale, Operation. The Department of the Navy
Welfare,andRecreationSupportActivityandare advocates the establishment and operation of
to be followed unless specific request for well-rounded morale, welfare, and recreational
deviationissubmittedthroughandapprovedby programstoinsurethementalandphysicalwell-
the appropriate chain of command and the being of its personnel. Adequate programs and
DefenceFinanceandAccountingService(DFAS). facilities to carry out this policy should be
The Navy Exchange and the Marine Corps provided, operated, and maintained through
Morale,Welfare,andRecreationSupportActivity financialsupporttenderedbytheDepartmentof
Manualscontainaccountingproceduresfortheir the Navy. Appropriated and Nonappropriated
respective systems and are subject to DFAS funds will be used as appropriate to fund the
review and approval. The Bureau Of Naval costof theseprogramsand facilities. Provisions
Personnel Recreation and Mess Central will be made to account for appropriated
AccountingSystem(RAMCAS)UsersHandbook expenses by categories and activity types.
contains detailed accounting procedures for
NAFIs participating in the RAMCAS and is B. Immunities and
subject to DFAS review and approval. Privileges. Theprogramsandfacilitiesprovided
Recommendations for improvements, through morale, welfare, and recreation
modificationsand/oradditionstothisappendix functions are deemed by the Department of the
are encouraged and should be submitted to the Navy to be essential to the performance of its
DFAS. functions. As such, they are necessary adjuncts
of the department. Morale, welfare, and
B. Private Organizations. recreationactivitiesoperatedasNonappropriated
Private organizations and funds thereof, FundInstrumentalities(NAFIs)areentitiesofthe
established and operated by individuals acting Government and as such are entitled to all the
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DoD Financial Management Regulation Volume 13, Appendix C
immunitiesandprivilegeswhichareavailableto G. Cross-ServiceBorrowing.
the departments and agencies of the Federal Totheextentfundsarenotavailablefromwithin
GovernmentundertheConstitutionandstatutes. the Department of the Navy, cross-service
borrowing of nonappropriated funds is
C. Civilian Employees. encouraged. Commercial borrowing will be
Morale, welfare, and recreation programs obtainedonlyasalastresort. Approvalofeither
established primarily for civilian employees of cross-service or commercial borrowing must be
theNavyareintendedtoprovidefoodandother obtainedinadvancefromtheapplicableprogram
services where required, and to offer certain manager.
recreational activities as inducement to
recruitment and retention of the civilian work C0103 SYSTEMS APPROVAL. DFAS-
force. HQ has the responsibility for final review and
approval of financial management processing
D. Administration of systems prior to implementation.
Programs. Morale, welfare, and recreation
programs will be administered in compliance
with applicable Federal laws and operate in
concert with certain state and municipal laws.
Questionsinvolvingjurisdictionandcompliance
which cannot be resolved locally, should be
submitted to the appropriate authority for
resolution.
E. Nondiscrimination. The
facilities and/or services of morale, welfare and
recreation programs will not be made available
to any group which practices discrimination on
the basis of gender, race, creed, color, age,
physically/mentallyhandicap,ornationalorigin.
This will not prohibit the establishment of
cultural or ethnic private organizations,
providing membership is not restricted or
discriminatory. Private organizations whose
memberships are restricted on the basis of
religion may be authorized to operate on DOD
installations provided authorization is also
approved for requests by similar organizations
without preference.
F. NonappropriatedFunds
are Government Funds. All nonappropriated
funds are government funds dedicated
exclusively to the collective welfare and
recreationofmilitaryandcivilianpersonneland
their dependents. These funds will not be
donated to any individual, firm, group, or
organization, charitable or otherwise, to the
detriment of the joint welfare and recreation of
all personnel and their dependents.
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Volume 13, Appendix C DoD Financial Management Regulation
CHAPTER 2
FINANCIAL MANAGEMENT
C0201 GENERAL likeablue-printandaflightplan,shouldcontain
sound, attainable objectives based on a realistic
C020101 BasicFunctionsofManagement. plan of operations rather than mere wishful
The basic functions of management include thinking.
planning,coordinatingandcontrolling. Planning
isdirectedtowardtheestablishmentofdesirable A. Accounting and
future objectives and the formation of an Management. Probably no other instrument
organizational structure to be followed in their contributesmoredirectlytomanagement thana
achievement. Coordination consists of budget. A budget embraces both accounting
integrating individual and group effort with the andmanagementfunctions. It isamanagement
over-all objectives. Controlling results from the function because it is an expression of
evaluation of individual and group effort in management’splansandanaccountingfunction
terms of the predetermined goals. because plans are translated into financial terms
for subsequent comparison with actual
C020102 Discharge of Management performance. Each of management’s primary
Functions. The effective discharge of these functions is directly served by budgeting.
functions is essential to sound business Planning is encouraged because careful study,
managementandsuccessfuloperations. Insmall investigations, and research must be given to
activities themanager may personally supervise expected future operations if the budget is to
everyphaseofoperationsandthebasicfunctions contain sound, attainable goals. Advanced
of management may be performed with little planning, in turn, increases the reliance of
recourse to accounting data. In larger entities, managementonfactfindinginmakingdecisions
direct personal supervision by one individual is and lessens the role of hunches and intuition in
seldom possible and it is necessary to establish managing a business enterprise.
a chain of command from top management to
departmental supervisors. Under such B. P r e p a r a t i o n .
circumstances, accounting becomes an indis- Coordination is facilitated as each level of
pensable tool of management. Accounting not management participates in the preparation of
only provides each level of management with the budget. In addition, a budget enables top
relevantfinancialdata,butitalsofurnishesbasic management to explain its objectives to each
facts required in planning, coordinating, and stratum of management. For example, planned
controlling. merchandise purchases are developed in
accordance with anticipated sales. Manpower
C0202 B U D G E T I N G A N D requirements and salary costs can be correlated
MANAGEMENT with anticipated income from services to be
rendered.
C020201 NatureofBudgeting. Budgeting
consists of establishing specific future goals and C. Control. While
periodicallymeasuringactualresultsagainstthe managerial planning and coordination are
plannedobjectives. Abudgetisaformalwritten important, they must accompanied by control.
statement of management’s plans for the future, Budgeting contributes to effective management
expressed in financial terms. A budget charts control through the preparation of frequent
the course of future action. Thus, it serves budgetreportsinwhichactualperformanceand
management in the same manner that the budgetofobjectivesarecomparedandvariations
architect’s blueprints assist the builder and the are revealed. The disclosure of variations
navigator’s flight plan aids the pilot. A budget, enables management to focus attention on the
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DoD Financial Management Regulation Volume 13, Appendix C
areaswhichrequireimmediatecorrectiveaction. D. Elements of Financial
Budgetobjectivesactasadeterrentagainstwaste Planning.
and serve to encourage efficiency and cost
savings. 1. Management of
Working Capital. The efficient administration
D. Budget Revisions. For and control of capital used in an activity.
the budget to remain an effective management
tool, revised budgets incorporating significant 2. Financial Plan.
program changes for the balance of an Determiningthesourcesandrequiredamountof
accounting period should be prepared. initial or additional capital. This is an estimate
Revisionsshouldnotbemadesolelytoeliminate based on past experience.
variations from planned performance.
3. O p e r a t i n g
C0203 BUDGETING PROCEDURES. Budget. The projection of income and expense
for a future period. Permits comparison and
C020301 Responsibility for Preparation. analysisofprojecteddatawithactualdata. This
is an estimated view of future income and
A. Budget Officer. The expensebased onpast experience. The estimate
responsibility for actual preparation of the will be influenced by management policies such
budgetisassignedtothelocalbudgetofficerand as a reduction of personnel costs which could
the MWR Director. Budgets are prepared for increase the net profit. It could also be
both appropriated and nonappropriated funds influenced by an anticipated reduction in
requirements in accordance with guidance patronagethroughmilitarytransferswhichcould
established by the program manager. resultinadecreaseinlevelofoperationsandnet
profit.
B. Budget Input. Requests
for budget estimates should be extended to the 4. CashBudget. A
lowest level in the chain of command to enlist projectionofcashreceiptsanddisbursementsfor
the participation and cooperation of all strata of a specified future period. It is necessary to
management. After the estimates have been know how much cash will be necessary to
received, they are reviewed and incorporated operate during the coming months and at what
into a master plan. This process usually timesandinwhatamountscashwillbeavailable
necessitates a revision of some of the estimates, to meet payment needs. Cash budget shall be
and each supervisor is given an opportunity to derived from and reconciled with the operating
defend his estimates and requests. The various and capital budgets.
budgets are then agreed upon and approved by
thecommandingofficer. Finally,thebudgetsare 5. Capital Budget.
distributed and explained to each responsible The projection of expenditures for acquisition,
supervisor as the operating plan against which construction, renovation, and expansion of
their performance will be compared. capitalized fixed assets such as furniture,
fixtures,equipment,andbuildingimprovements.
C. Sources of Information. Thesourceoffundingandestimatedcompletion
Budgets are dependent upon the preparation of date shall be indicated.
timely, clear, and accurate financial statements
reporting operational results and financial 6. A n n u a l
condition of the business entity. The financial AppropriatedFundBudget. Anitemizedlisting
condition of an activity is presented in its of required appropriated fund support.
balance sheet, while its earnings are reported in
the income statement. The items appearing in 7. Balance Sheet
these statements are major considerations in Projection. The projection of assets, liabilities,
planning.
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Volume 13, Appendix C DoD Financial Management Regulation
andnetworthatafuturedatebasedonplanned other department). Dollar amounts may be
operational results. applied to measurement units upon
determination of pricing and rate standard.
C0204 OPERATING BUDGET
2. Forecasting
A. General. Initssimplest, Procedure. Future receipts from the sale of
the operating budget is expected receipts less goods should be computed separately from
desiredprofits. Planningisdesignedtoincrease income from other activities such as room
receipts or reduce allowable costs andexpenses, service, greens fees, and member-
or both, to achieve the desired profit objective. ship dues, etc.
For instance, once the desired profit is
determined, there must be planning to obtain 3. Other forecasts.
this profit. It may be reached by increasing Income from similar activities may forecast in a
receipts through more aggressive promotion, like manner. Income from nonresale activities
additional facilities, or a rise in prices. The may be forecast directly in terms of measured
profit objective, through more effective units and by the application of rates as
management,mayalsobeapproachedbycutting determined by the board or council, or as
costs (allowable costs) through a reduction in prescribed in the by-laws in the case of
personnel, tighter control on costs, or reduction membership dues and assessments.
of administrative expenses. Considerationshouldbegiventosuchfactorsas
number of dependents, training schedules,
B. Profit Objective. The seasonal variations, and holidays.
profit objective should be consistent with the
needformaintainingthelowestpossiblepriceto D. Limiting Expenses.
customers, expansion requirements, and other When the total gross income from sales and
management needs. An activity which has other activity sources has been forecast, the
acquired elaborate, or even adequate facilities, dollar amount of net profit needed to support
maybein apositiontobudget profitsat or near future requirements may be determined. The
the break-even point, and pass along the usual difference between these two figures (gross
operating gains to customers through reduced income and net profit) represents the maximum
prices, dues, or other service charges. The amount which may be used to defray all
purposeofthebudgetundersuchcircumstances expensesduringthebudgetperiod. Majorcosts
is to limit administrative expenses so as to such as cost of goods sold, wages and salaries,
increasethe direct benefit accruing to customers personnel benefits, utilities, and depreciation
through lower charges. should be forecast separately for each month of
the budget period. General and administrative
C. Forecasting Receipts. expenses representing smaller amounts may be
Forecastingfuturereceiptsisthemostimportant consolidated. The distribution of expense by
element in the operating budget since all other activity should be accomplished when
elements are dependent upon this figure and practicable. Prior experience should be the basis
must vary accordingly. for apportioning expense allowances to the
various activity accounts. Past expenses,
1. B a s i c however, should be examined closely as to
ManagementUnit. Abasicunitofmeasurement propriety and necessity. Savings accomplished
must be determined to forecast future receipts. andreflectedingreaterprofitsmaybeconverted
This unit of measurement is obtained from data to lower prices in subsequent periods. This
collected from past operations. The factoractuallymayinducegreaterdollarvolume
measurement unit may be selected from such gross income through increased patronage.
data as the number of customers, meals, and Conversely, it may be found that the budgeted
guests applicable to each major activity (bar, gross income is so low as to result in the forced
dining room, golf course, barber shop, or any reduction of essential expenses, adversely
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DoD Financial Management Regulation Volume 13, Appendix C
affecting sales volume and patronage. These to meet cash requirements. The cash budget
matters cannot be resolved by a predetermined should be prepared progressively by monthly
formula but must be resolved by good revision to provide a perpetual forecast. The
management. period of time covered by a cash budget varies
with the type of business and the activity’s cash
E. PresentationofOperating position. When the supply of cash is short, a
Budget. The final form of the operating budget weekly or even a daily cash budget may be
is the same as the income statement, except that necessary. Ordinarily,however,twelveseparate
provisionismadeformonthlycomparisons. All monthly budgets are prepared for the year.
items should be expressed in terms of Cash budgets are usually accompanied by
percentages of total sales for analysis and detailed schedules of the major items
comparative purposes. summarized in the budget. Forecasts of total
incomeasreflectedintheoperatingbudgetmust
C0205 CASH BUDGET be adjusted for cash transactions. Cash receipts
arising from credit sales and other charges will
C020501 General. A cash budget is an necessitate preparation of accounts receivable
effectivetoolinplanningcashrequirementsand aging schedules, actual and projected. Monthly
resources of a business. It is important to note comparison should be made with actual cash
that the excess or deficit of cash receipts over receipts and disbursements for the purpose of
disbursements for a given accounting period planning future operations.
maynotequaltheamountofnetprofitorlossas
reported in the income statement for the same C0206 CAPITAL BUDGET
period. Salesoncredit,purchasesoncredit,and
otheraccrualsreflectedintheincomestatements A. General. The capital
prevent a direct comparison. budget is a summary of proposed expenditures
of cash for depreciable assets for the following
C020502 Purpose. The primary purpose purposes:
of the cash budget is to identify existing and
anticipatedcashresourcestofinanceoperations, 1. Additions and
pay debts as they mature, pay for desired extensions to property and equipment.
expansion, and maintain the business in a
satisfactory or liquid position. Sales volume, 2. New property
inventory levels, pricing, credit policies, and and equipment.
plans for replacement and expansion of fixed
assets, should be critically reexamined in the 3. Replacement of
light of the cash budget, and modified as property and equipment unit.
necessary. When the cash budget indicates a
deficit during all or part of the budget period, 4. F u r niture,
the entire plan of operations may be too fixtures, and office equipment.
ambitious for the resources available. Certain
budgeted activities may have to be curtailed or B. Purpose. The objective
deferred until additional capital can be accrued of the capital budget is to increase or at least
from future earnings. maintainfutureprofitswithoutjeopardizing the
financial stability of the activity. Expansion or
C020503 Preparation. In estimating cash replacement proposals that do not further sales
receipts and disbursements, other budgets must volume are not in themselves a sufficient basis
be carefully studied. Appropriate consideration for expanding capital investment, unless it is to
should be given to future plans of management be supported by a continuing high volume.
which will affect cash. After cash receipts and
disbursementshavebeenestimated,aminimum C. Long Range Planning.
cashbalanceisestablished thatwillbe adequate
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1. Planning for E. FinancingReplacements
capital expenditure must be considered from a and Expansion. Capital expenditures for
long-range viewpoint to include the following replacement of fixed assets as a general rule
considerations: shouldbelimitedtotheaccumulatedallowances
for depreciation, while expansion of amounts
a. Long- required as additions to working capital.
termestimateofrevenue,costofoperations,and
profits. F. Preparation. Thecapital
budget should be prepared in two forms.
b. Possibly
serveanincreasedpatronagewithoutexpansion 1. A listing of
of fixed assets. individual projects or fixed asset items to be
acquired during a future period stating the
c. estimated cost of each, the date and amount of
Determineexpansionofpropertyandequipment actualexpenditures,andtheunexpendedbalance
requiredtoserveincreasedpatronageintermsof of budgeted expenditure.
physical units.
2. Summarized by
d. Abilityto Period. Capital budget summarized by period.
obtain the required amount of capital when The budgeted project may be summarized for
needed. each budget period and computation made of
thetotalfundsestimatedtobecomeavailablefor
2. The capital capital expenditures.
budget may be forecast by calendar quarters for
1 year in advance, and for each year thereafter C0207 BALANCESHEETPROJECTION
up to 5 years.
A. General. The balance
D. Sources of Capital. sheet projection is a preview of the financial
Failure to carefully budget capital expenditures condition on a specified future date, based on
is likely to result in the diversion of cash the plan of operations adopted. The balance
requiredforworkingcapitaltotheacquisitionof sheet projection may be prepared as a
fixed assets, thereby impairing the ability of the culmination of other forecasts and budgets
fund to meet its current financial obligations. If specified in other sections of this Chapter.
cash required for operations is used for this
purpose, it results in a diversion of working B. Purpose. The balance
capital into fixed capital. The maximum funds sheet projection may be used to:
available for capital expenditures, without
impairmentofworkingcapital,aremeasuredby: 1. Notetheflowof
reinvested profits into current and fixed assets.
1. Reinvested
(Retained) earnings for a given period. 2. Check on the
accuracy of the operating budgets.
2. A n n u a l
allowances for depreciation (accumulated 3. Aid in planning
depreciation accrued through monthly charges). capital expansion.
3. Proceeds from 4. Forecast cash
loans (ultimately to be repaid from future balances and requirements.
earnings).
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DoD Financial Management Regulation Volume 13, Appendix C
5. Aid profit listed in order of liquidity, which is the order of
planning designed to secure an adequate return their expected conversion to cash.
on the total investment.
2. C u r r e n t
6. Maintain the Liabilities. Debts that in the ordinary course of
ratio of current assets to current liabilities and businesswillbeliquidatedwithinayearsuchas
other financial ratios at a desirable level. accounts payable, loans payable, salaries and
wages payable, and collections received in
C. Preparation. Thebalance advance for which goods or services will be
sheet projection should be maintained for given within a year.
periods coinciding with those of the operating
budget. It should be prepared in substantially 3. WorkingCapital.
thesameformasthebalancesheetexceptthatit The excess of current assets over current
may be condensed to show only the more liabilities.
significant items. If other budgets discussed in
this chapter are regularly prepared, very little 4. Fixed Capital.
additionaleffortwillberequiredforpreparation That portion of total capital (additional to
of the balance sheet projection since most of the working capital) consisting of relatively
projected items have already been ascertained. permanentassetsacquiredforuseintheconduct
Only a few additional items such as prepaid of the business. Such capital is not intended for
expensemustbeprojected. Accountsreceivable disposal in the ordinary course of events, and
are estimated by adding to the opening balance includes items such as furniture, fixtures,
the amount of estimated sales on account, less equipment, and building improvements.
estimated collections during the period.
Similarly,otherbalancesheetitemsareprojected B. FlowofWorkingCapital.
based on data contained in the operating, cash, Uponestablishingabusiness,cashmaycomprise
and capital expenditure budgets. the total capital. A part of cash is invested in
fixed assets such as equipment, furnishings,
D. Use of Financial Ratios. building improvements, etc. The remainder is
Financial ratios referred to in the following retained in part as cash to meet operating
paragraph should be used in the analysis of the expenses, and in part to purchase foods as the
balancesheetprojection. Comparisonsofdesired stock in trade. These goods are sold and
financial ratios with projected ratios may result convertedintocashoraccountsreceivable,which
in modification of operational plans and budget are ultimately collected in cash, to complete the
elements. working capital cycle. Each time the cycle is
made,fromcashtogoodstocash,itshouldyield
C0208 MANAGEMENTOFWORKING a return. A constant and rapid circulation
CAPITAL (cycling) of working capital is desirable to
compound the yield and increase the return, in
A. General. Workingcapital relation to the amount of working capital
management includes the following terms: required.
1. Current Assets. C. Administration of
Cash and other assets that may reasonably be Current Assets.
expected to be realized in cash, sold or
consumed, within 1 year through the normal 1. Cash. A cash
operations of the business. In addition to cash, balance on hand and in banks should be
the assets usually found in this group are maintained at the minimum amounts required
accounts receivable, loans receivable, forchangefunds,pettycashandpayablesduein
merchandise inventory, short-term investments, thenextsucceedingmonth. Additionalamounts
and prepaid expenses. They are customarily not used in current operations should be
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Volume 13, Appendix C DoD Financial Management Regulation
invested in securities redeemable when cash is d. Termsof
desired, and yielding maximum interest. credit sales.
2. Receivables. The e. Overall
volumeofreceivablesisdeterminedbysalesand expansion.
credit policies and by the effectiveness of
collectionof outstandingaccounts. Theefficient f. Seasonal
collectionofreceivablesisavitalpartofworking variations.
capital management. Laxity in this regard may
tie up an undue amount of cash otherwise g. Changes
needed as working capital as well as increase in customer strength.
losses from bad debts. It may be necessary to
impose customer credit limits on accounts that 2. Theapproximate
are in excess of a reasonable period or amount. amountofworkingcapitalrequiredtooperateat
agivendate,andtheamountofworkingcapital
3. Inventories. excess or deficit, may be calculated as follows:
Inventorymanagementinvolvesregulationofthe
size of the invest-ment in goods on hand, the Current Assets
types of goods carried in stock, and turnover Less: Current Liabilities
rates. The investment in inventory should be Equals: Working Capital
keptata minimumconsistentwithmaintenance Less: One Inventory Turnover
of adequate stocks of proper quality to meet Less: Net of 1 Month’s Expenses and
sales demand. Increases or decreases in the Revenues from other than Sales
inventory investment must be tested against the Activities
effect on profits and working capital. Standard Equals: Working Capital Excess or
levels of inventory should be established as Deficit
adequate for a given volume of business, and
stock control procedures applied so as to limit E. Working Capital Ratios.
purchase as required. Such controls should not Theratioanalysisorworkingcapitalcanbeused
preclude volume purchase of nonperishable bymanagementasameansofcheckinguponthe
items when price advantages may be obtained efficiency with which working capital is being
under unusual circumstances. The rate of applied. Important ratios for working capital
inventory turnover is a valuable test of management analysis are the working capital
merchandising efficiency and should be andinventoryturnoverrationsandtheturnover
computed monthly. or average collection period for accounts
receivable. The behavior of ratios, over a series
D. Required Working of accounting periods, is indicative of trends
Capital. which may signal the need for adjustments in
the future. Some of the working capital ratios
1. The following which may be computed are described below.
factors generally affect the amount of working
capital required: 1. Capital Ratio.
The relationship between current assets and
a. Turn- current liabilities is called the current ratio. This
over rate of inventories. ratiomeasurestheabilitytopayshorttermdebts
andiscomputedbydividingthetotalofcurrent
b. Turn- assets by the total of current liabilities.
over rates of accounts receivable. Marketable securities, receivables, and
inventoriesmay declineinvalue andthere isno
c. Termsof certainty as to when they will be converted into
purchase. cash. Ontheotherhand,currentliabilitiesmust
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