Accounting 102 Chapter 13 Financial Statement Analysis

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  1. Horizontal Analysis (p. 652)
    A comparison of financial statement items over a period of time.
  2. Vertical analysis (p. 652)
    A comparison of various financial statement items within a single period with the use of common-size statements.
  3. Trend Analysis (p. 655)
    Tracking items over a series of years
  4. Common-size statements (p. 656)
    Recast all items on the statement as a percentage of a selected item on the statement.
  5. Gross profit ratio (p. 657)
    Gross profit to net sale.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BGrossProfit%7D%7BNet%20Sales%7D&chs=182x74
  6. Profit Margin (p. 657)
    Net income to net sales

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNet%20Income%7D%7BNet%20Sales%7D&chs=170x68

    An overall indicator of management's ability to control expenses, reflects the amount of income for each dollar of sales.
  7. Liquidity (p. 658)
    The nearness to cash of the assets and liabilities.

    Nearness to cash deals with the length of time before cash is realized.

    They concern basically the company's ability to pay its debts as they come due
  8. Working capital (p. 658)
    Current assets minus current liabilities.
  9. Current ratio (p. 659)
    The ratio of current assets to current liabilities.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BCurrent%20Assets%7D%7BCurrent%20Liabilities%7D&chs=262x68
  10. Acid-test or quick ratio (p. 660)
    A stricter test of liquidity than the current ratio; excludes inventory and prepayments from the numerator.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BQuick%20Assets%7D%7BCurrent%20Liabilities%7D&chs=262x74
  11. Cash flow from operations tocurrent liabilities ratio (p. 660)
    A measure of the ability to pay current debts from operating cashflows.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNetCashProvided%20by%20Operating%20Activities%7D%7BAverage%20Current%20Liabilities%7D&chs=580x82
  12. Accounts receivable turnover ratio (p. 661)
    A measure of the number of times accounts receivable are collected in a period.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNet%20Credit%20Sales%7D%7BAverage%20Accounts%20Receivable%7D&chs=408x76
  13. Number of days' sales in receivables
    A measure of the average age of accounts receivable.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNumber%20of%20Days%20in%20the%20Period%7D%7BAccounts%20Receivable%20Turnover%7D&chs=428x76
  14. Inventory turnover ratio (p. 662)
    A measure of the number of times inventory is sold during a period.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BCost%20of%20Goods%20Sold%7D%7BAverage%20Inventory%7D&chs=270x82
  15. Number of days' sales in inventory (p. 663)
    A measure of how long it takes to sell inventory.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNumber%20of%20Days%20in%20Period%7D%7BInventory%20Turnover%7D&chs=356x80
  16. Cash-to-cash operating cycle (p. 663)
    The length of time from the purchase of inventory to the collection of any receivable from the sale.

    Number of Days' Sales in Inventory + Number of Days' Sales in Receivables.
  17. Solvency (p. 663)
    The ability of a company to remain in business over the long term.
  18. Debt-to-equity ratio (p. 664)
    The ratio of total liabilities to total stockholders' equity.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BTotal%20Liabilities%7D%7BTotal%20Stockholders'%20Equity%7D&chs=368x74

    To determine the degree to which the company relies on outsiders for funds.
  19. Times interest earned ratio (p. 664)
    An income statement measure of the ability of a company to meet its interest payments.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNetIncome%2BInterestExpense%2BIncomeTaxExpense%7D%7BInterest%20Expense%7D&chs=772x80
  20. Debt service coverage ratio (p. 665)
    A statement of cash flows measure of the ability of a company to meet its interest and principal payments.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BCashFlowFromOperationsBeforeInterest%20and%20TaxPayments%7D%7BInterestAndPrincipalPayments%7D&chs=876x82
  21. Cash flow from operations to capital expenditures ratio (p. 666)
    A measure of the ability of a company to finance long-term asset acquisitions with cash from operations.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BCashFlowFromOperations-Total%20DividendsPaid%7D%7BCashPaidForAcquisitions%7D&chs=710x80
  22. Profitability (p. 666)
    How well management is using company resources to earn a return on the funds invested by various groups.
  23. Return on assets ratio (p. 666)
    A measure of a company's success in earning a return for all providers of capital.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNetIncome%2BInterestExpense%2CNetOfTax%7D%7BAverage%20Total%20Assets%7D&chs=606x82
  24. Return on sales ratio (p. 667)
    A variation of the profit margin ratio;measures earnings before payments to creditors.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNetIncome%2BInterestExpense%2CNetOfTax%7D%7BNetSales%7D&chs=596x74
  25. Asset turnover ratio (p. 668)
    The relationship between net sales and average total assets.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNetSales%7D%7BAverageTotalAssets%7D&chs=294x76
  26. Return on common stockholders' equity ratio (p. 668)
    A measure of a company's success in earning a return for the common stockholders.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNetIncome-PreferredDividends%7D%7BAverageCommonStockholdersEquity%7D&chs=536x82
  27. Leverage (p. 669)
    The use of borrowed funds and amounts contributed by preferred stockholders to earn an overall return higher than the cost of these funds.
  28. Earnings per share (EPS) (p. 670)
    A company's bottom line stated on a per-share basis.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BNetIncome-PreferredDividends%7D%7BWeightedAverageNumberOfCommonSharesOutstanding%7D&chs=832x82
  29. Price/earnings (P/E) ratio (p. 670)
    The relationship between a company's performance according to the income statement and its performance in the stock market.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BCurrentMarketPrice%7D%7BEarningsPerShare%7D&chs=308x74
  30. Dividend payout ratio (p. 671)
    The percentage of earnings paid out as dividends.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BCommonDividendsPerShare%7D%7BEarningsPerShare%7D&chs=416x74
  31. Dividend yield ratio (p. 672)
    The relationship between dividends and the market price of a company's stock.

    chart?chf=bg,s,00000000&cht=tx&chl=%5Cfrac%7BCommondDividendsPerShare%7D%7BMarketPricePerShare%7D&chs=436x68
Author:
davecowman
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Card Set:
Accounting 102 Chapter 13 Financial Statement Analysis
Updated:
2015-09-30 13:35:17
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Financial Statement Analysis
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