BUS 242 Chapter 17
Other Expenses
Expenses accrued outside of normal operation
Gross Profit
Sales minus cost of goods sold.
Liquidity
The ability of a company to convert assets into cash
Solvency
The ability of a company to pay its debts
Common size statement
Two vertical Analysis of similar company's Stated in rates( and you compare the rates)
Profit margin
net income divided by sales
Total Liabilities and stockholders' equity =
Total assets
Using borrowed funds to generate a greater amount of returns than you are paying for use of the funds
Leverage
Number of Times Interest Earned is a
Measure of credit worthiness
Market Price per Share of Common/ Divided by Earning per Share on Common Stock equals
Price earning Ratio (P/E) Ratio
Measures a Company's future earnings prospects
Price earning Ratio (P/E) Ratio
Acid Test Ratio Some times called
Quick Ratio
Inventories and prepaid assets are excluded in the calculation of the
Quick Ratio
Quick Assets Divided by Current Liabilities (Equals)
Quick Ratio
Quick Ratio (Acid-test ratio)
Quick assets Divided by Current Liabilities
Net Income
The amount in which revenues exceed expense
Property, plant and equipment (NET)
Book Value
Users analyze a company's financial statement
Analytical Method
Profitability
Ability to earn income
A company's ability to collect its accounts receivable is called
Accounts Receivable Analysis
Accounts Receivable (NET)
Accounts Receivable Minus allowance for doubtful accounts
Total assets minus Total liabilities (Equals)
Capital/ Stockholder Equity/Owner Equity
Current Assets
Cash, Prepaid Expenses, Inventories,Temporary Investments, Accounts Receivable(net)
Quick Assets
Cash, Temporary investments and Receivables.
Current Assets Divided by Current Liabilities (Equals)
Current Ratio
Working Capital
Currents Assents minus Current Liabilities
Excess inventory
Decreases liquidity by tying up funds(Cash) and increases risk of losses by declines of prices or obsolescence of inventory
Dividend per Share of Common stock Divided by Market Price per Share of Common Stock
Dividend Yield
How well the company is paying stockholders
Dividend Yield
Net Income (minus) Preferred Dividends /Divided Average Number of Common Shares Outstanding
Earnings Per Share
Other Income
Income received out side of normal operation
Liquidity, Solvency and Profitability (Are)
Interrelated
Current ratio
Is a more reliable indicator of a company's ability to pay its current liabilities than working capital
The current ratio is a more reliable indicator of a company's ability to pa its current liabilities than is
Working Capital
