Peer Review

The Importance of Business Liquidity and the Concept of an Operating Cycle

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Reviewed:: Apr 9, 2018 by Business

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Ratings

Overall Rating:

Content Quality:

Effectiveness:

Ease of Use:

Overview:

This 4:34 minute presentation is the last in the sequence of five videos that correspond to Chapter 4, The Reporting Cycle, for the Accounting Cycle online (four chapter) textbook at PrinciplesofAccounting.com. As the title implies, the video lecture explains the importance of business liquidity to organizations. Working capital, the current ratio, and quick ratio are discussed. Examples used to explain the current ratio make the concept easy to understand.

Type of Material:

Presentation

Recommended Uses:

Supplemental lecture for an online class.

Technical Requirements:

Internet browser, user must sign up for bookboon.com

Identify Major Learning Goals:

To understand the concept of an operating cycle for different types of businesses.

To comprehend the use of the current ratio as a tool to measure business liquidity.
To learn how the current ratio can be manipulated by changes in the current assets and current liabilities.

Target Student Population:

High school or undergraduate college students enrolled in a principles of financial or managerial accounting class.

Prerequisite Knowledge or Skills:

Concepts typically covered in the first couple of chapters of a principles of financial accounting class. Basic terminology such as classified balance sheet, current assets, accounts receivable, inventory, and current liabilities.

Content Quality

Rating:

Strengths:

All principles of accounting textbooks include a discussion of liquidity, including working capital, the current ratio, and the quick ratio. As a result, this video is well suited as a supplement to in-class or online instruction.

The presentation offers a concise explanation of the differences between businesses, using an example with which students will be familiar. Content is presented, for the most part, clearly and concisely. The concept of the current ratio as a tool to evaluate a business's liquidity is explained well and contains examples that are easy to follow.
All relevant terms are defined, and the information presented is accurate and relevant despite the 2010 copyright date.

Concerns:

An example as to how the current ratio can be manipulated is provided verbally. Having a concrete example would enhance the presentation.

No lecture summary has been included.

Potential Effectiveness as a Teaching Tool

Rating:

Strengths:

Used in the proper context, the video lecture is both effective and efficient.

Two overarching objectives are stated in the beginning of the presentation.
This presentation lends itself well to assignments and is an excellent way for students to grasp the connection between a business operating cycle and the current ratio.
Concepts are introduced and reinforced progressively, building on prior concepts, and demonstrating relationships between them. The examples included help students apply the concepts.
This video lecture promotes conceptual understanding and promotes understanding.

Concerns:

Prerequisite knowledge is not explicitly identified. However, the fact that the video is the 5th in the sequence, for individuals completing the online course, is referenced.

An assignment would need to be developed to assess understanding, particularly in terms of the impact of inventory on the current ratio.

Ease of Use for Both Students and Faculty

Rating:

Strengths:

The presentation consists of the author lecturing next to a wide-screen display, which is a nice enhancement compared to the voice-over slide show lecture approach.

The slides used to illustrate concepts are well done and visually appealing.
At times, the camera zooms in on the screen to highlight important concepts, which is a nice feature.
The author has excellent presentation skills, and his pacing is very good.
The video can be downloaded as an MP4 file and viewed offline.
A transcript of the video can be found at https://www.principlesofaccounting.com/chapter-4/business-liquidity/ as well as problems and a quiz that covers Chapter 4.

Concerns:

The website is accessible only by free subscription to bookboon.com, which involves receiving email advertisements for their products and services. Depending on the media player used, the audio may be of lower quality than the rest of the presentation but is still good quality.

Other Issues and Comments:

While this video has been posted online at Bookboon.com and in YouTube and appears to be available for educational purposes free of charge, instructors should review the terms of use screen (url listed below). Author permission may need to be obtained.

https://www.principlesofaccounting.com/terms/

Creative Commons: