Studied by 3 people
financial statement
A(n) ________ user should be able to understand relationships, activities, and results from business operations when viewing a statement.
debt and stockholders’ equity
Financing for assets come from ________.
Horizontal (trend) analyses
_________ help financial statement users recognize important financial changes that unfold over time.
horizontal, vertical, and ratio
The three different types of analyses:
trends
They compare individual financial statement line items to ______.
Vertical analyses
________ show relationships between items on a financial statement. They compare the balance of one account to another.
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.
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.
time-series analyses
Horizontal analyses is also called __________ because of the comparison of results over time.
dollars or percentages
Horizontal analyses results are presented as year to year _________.
Equation for calculating change (%)
Vertical (common size) analysis
__________ focuses on relationships regarding financial statements.
percentages
Vertical (common size) analysis relies on __________ to translate results and relationships.
common size balance sheet
A(n) _________ shows the percent of total assets and each liability or stockholders’ equity as a percent of their total.
common size income statement
A(n) _________ gives the percentage of sales for items on the income statement.
common size
Ratio analyses is similar to _________ in the manner of how they both consider size in comparisons.
profitability, liquidity, solvency
The three categories of ratios:
Profitability
_________ ratios focus on a company’s net income within a current period.
Liquidity
_______ ratios indicate how well a company can use or sell current assets to pay the liabilities they have.
Solvency
________ ratios assure that a company can repay lenders and interest payments.
Net profit margins
_________ help when evaluating a company and shows the percentage of revenue a company generates.
Equation to calculate Net Profit Margin:
gross profit percentage
A(n) __________ shows the overall profit made on sales.
Equation to calculate gross profit percentage:
fixed asset turnover
The _______ ratio tells us the revenue earned for the amount of money a company puts into fixed assets.
Equation to calculate fixed asset turnover:
return on equity
The ________ ratio compares earned income for stockholders to the average amount of equity. It is reported as a percentage.
Equation to calculate return on equity:
Earnings per share
________ gives the amount of earnings from outstanding shares.
Equation to calculate earnings per share:
price/earning
The ________ ratio correlates the stock price to the stock’s earnings per share.
Equation to calculate price/earnings ratio:
receivables turnover
The ________ ratio indicates how well a company can collect on its’ receivables.
Equation to calculate receivables turnover:
inventory turnover
The _________ ratio is the frequency of inventory being bought during the process of buying and selling items.
Equation to calculate inventory turnover:
current
The ________ ratio compares current assets to current liabilities to see if those assets can pay the liabilities.
Equation to calculate current ratio:
debt-to-assets
The ________ ratio is able to show how much of a company is funded by debt and financed by creditors.
Equation to calculate debt-to-asset ratio:
times interest earned
The ________ ratio indicates if a company’s current income can cover its debts.
Equation to calculate times interest earned:
how and why a company makes the decisions they do
Ratios can give us insight into ________.
Choice of method
_________ for certain aspects of business are different from business to business.
full disclosure principle
The _________ demands that all appropriate information regarding a business’s operations must be included on their financial statements.
going-concern assumption
The ________ lays out accounting rules.
continuity
The going-concern assumption is also called _________.
significant changes
________ are the focus of horizontal computations.
horizontal (trend) computations
Horizontal (trend) analyses is also called _________.
dollar amount and percentage
Examine and compare the ________ to ensure your final results and conclusion.
