Business Analysis

BAR — Business Analysis & Reporting Exam: CPA — BAR (Business Analysis & Reporting Discipline) Last Updated: June 2026 --- ## Financial Statement Analysis ### Liquidity Ratios | Ratio | Formula | What It Measures | |---|---|---| | Current Ratio | Current Assets / Current Liabilities | Ability to pay short-term obligations | | Quick (Acid-Test) Ratio | (Cash + ST Investments + Receivables) / Current Liabilities | Immediate liquidity (excludes inventory) | | Cash Ratio | Cash + Cash Equivalents / Current Liabilities | Most conservative liquidity measure | > Exam Tip: A current ratio of 2:1 is traditionally considered adequate, but context matters. Quick ratio excludes inventory because inventory takes time to convert to cash. ### Activity (Efficiency) Ratios | Ratio | Formula | Interpretation | |---|---|---| | Receivables Turnover | Net Credit Sales / Average AR | Higher = faster collection | | Days Sales Outstanding (DSO) | 365 / Receivables Turnover | Avg days to collect; compare to credit terms | | Inventory Turnover | COGS / Average Inventory | Higher = faster moving inventory | | Days in Inventory | 365 / Inventory Turnover | Avg days to sell inventory | | Payables Turnover | Purchases / Average AP | Lower = longer payment terms | | Asset Turnover | Net Sales / Average Total Assets | Revenue generated per dollar of assets | Cash Conversion Cycle (CCC): `` CCC = Days in Inventory + Days Sales Outstanding − Days Payable Outstanding `` Lower CCC = better cash management (less time cash is tied up in operations). ### Leverage (Solvency) Ratios | Ratio | Formula | Interpretation | |---|---|---| | Debt-to-Equity | Total Debt…