Chapter 13: Measuring and Evaluating Financial Performance

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financial statement

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50 Terms

1

financial statement

A(n) ________ user should be able to understand relationships, activities, and results from business operations when viewing a statement.

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2

debt and stockholders’ equity

Financing for assets come from ________.

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3

Horizontal (trend) analyses

_________ help financial statement users recognize important financial changes that unfold over time.

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4

horizontal, vertical, and ratio

The three different types of analyses:

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5

trends

They compare individual financial statement line items to ______.

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6

Vertical analyses

________ show relationships between items on a financial statement. They compare the balance of one account to another.

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7

Ratio analyses

________ are used to understand relationships between items on one or more financial statements. It shows a company’s performance from using their resources.

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8

analysis

A(n) _________ is considered “complete” once it is successfully able to create a better understanding for those who review financial statement and its results.

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9

time-series analyses

Horizontal analyses is also called __________ because of the comparison of results over time.

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10

dollars or percentages

Horizontal analyses results are presented as year to year _________.

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11
<p></p>

Equation for calculating change (%)

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12

Vertical (common size) analysis

__________ focuses on relationships regarding financial statements.

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13

percentages

Vertical (common size) analysis relies on __________ to translate results and relationships.

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14

common size balance sheet

A(n) _________ shows the percent of total assets and each liability or stockholders’ equity as a percent of their total.

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15

common size income statement

A(n) _________ gives the percentage of sales for items on the income statement.

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16

common size

Ratio analyses is similar to _________ in the manner of how they both consider size in comparisons.

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17

profitability, liquidity, solvency

The three categories of ratios:

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18

Profitability

_________ ratios focus on a company’s net income within a current period.

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19

Liquidity

_______ ratios indicate how well a company can use or sell current assets to pay the liabilities they have.

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20

Solvency

________ ratios assure that a company can repay lenders and interest payments.

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21

Net profit margins

_________ help when evaluating a company and shows the percentage of revenue a company generates.

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22
<p></p>

Equation to calculate Net Profit Margin:

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23

gross profit percentage

A(n) __________ shows the overall profit made on sales.

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24
<p></p>

Equation to calculate gross profit percentage:

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25

fixed asset turnover

The _______ ratio tells us the revenue earned for the amount of money a company puts into fixed assets.

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26
<p></p>

Equation to calculate fixed asset turnover:

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27

return on equity

The ________ ratio compares earned income for stockholders to the average amount of equity. It is reported as a percentage.

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28
<p></p>

Equation to calculate return on equity:

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29

Earnings per share

________ gives the amount of earnings from outstanding shares.

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30
<p></p>

Equation to calculate earnings per share:

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31

price/earning

The ________ ratio correlates the stock price to the stock’s earnings per share.

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32
<p></p>

Equation to calculate price/earnings ratio:

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33

receivables turnover

The ________ ratio indicates how well a company can collect on its’ receivables.

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34
<p></p>

Equation to calculate receivables turnover:

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35

inventory turnover

The _________ ratio is the frequency of inventory being bought during the process of buying and selling items.

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36
<p></p>

Equation to calculate inventory turnover:

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37

current

The ________ ratio compares current assets to current liabilities to see if those assets can pay the liabilities.

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38
<p></p>

Equation to calculate current ratio:

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39

debt-to-assets

The ________ ratio is able to show how much of a company is funded by debt and financed by creditors.

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40
<p></p>

Equation to calculate debt-to-asset ratio:

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41

times interest earned

The ________ ratio indicates if a company’s current income can cover its debts.

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42
<p></p>

Equation to calculate times interest earned:

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43

how and why a company makes the decisions they do

Ratios can give us insight into ________.

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44

Choice of method

_________ for certain aspects of business are different from business to business.

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45

full disclosure principle

The _________ demands that all appropriate information regarding a business’s operations must be included on their financial statements.

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46

going-concern assumption

The ________ lays out accounting rules.

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47

continuity

The going-concern assumption is also called _________.

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48

significant changes

________ are the focus of horizontal computations.

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49

horizontal (trend) computations

Horizontal (trend) analyses is also called _________.

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50

dollar amount and percentage

Examine and compare the ________ to ensure your final results and conclusion.

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