Ch. 13

______ balance sheets express each item as a percent of a base amount. The base amount is assigned a value of 100%.

Common Size

the ________ ratio takes sum of cash, short term investments, and current receivables and divides the total by current liabilities. It helps determine immediate short term debt paying ability

acid-test

what is the formula for dividend yield

annual cash dividends per share / market price per share

The base amount used in common-size balance sheets is total _____

assets

the formula for dollar change for financial statement analysis is computed by taking the analysis period amount minus ______ period amount

base

to compute the percent change, divide the (analysis period amount - base period amount)/___________ * 100

base period amoint

_______ refers to a company's makeup of equity and debt financing

capital structure

vertical analysis is also called ____ - ____ analysis

common size

_____ financial statements show financial amounts in side-by-side columns on a single statement.

comparative

a comparison of a company's financial condition and performance across time is called ____ analysis

horizontal

Return on equity measures the amount of ______ earned for its owners. It is computed by taking net income divided by average total equity.

income

the purpose of financial statement analysis (internal/external) _______ users is to provide information to improve efficiency and effectiveness.

internal

an investor in able Inc. would like to understand ables availability of resources to pay its short term cash requirement. This type of analysis is known as a _______ measure

liquidity

what is the formula for the price earning ratio

market price per common share / earnings per share

_________ refers to a company's ability to generate an adequate return

profitability

a measurement of key relations between financial statement items is called ______ analysis

ratio

The base amount used in a common-size income statement is _____.

revenue

comparative financial statements show financial information in ____ columns

side - by - side

refers to a company's ability to meet long-term obligations and generate future revenues.

solvency

analysis typically use computation of dollar changes and percent changes because:

sometimes dollar changes are small, but percent's are large

analysts typically use computation of dollar changes as percent changes because:

sometimes dollar changes are small, but percent's are large

when interpreting measures from financial statement analysis, we need _____ (or benchmarks) for comparisons.

standards

Gross Profit

the difference between net sales and cost of goods sold

data visualizations reveal:

trends and insights not easily seen by looking at numbers

the amount of current assets minus current liabilities is called _____ _____

working capital

what is the formula for days sales uncollected?

(accounts receivable / net sales) * 365

what is the formula for days sales in inventory

(ending inventory / cost of goods sold) * 365

what is times interest earned

(income before interest expense and income tax expense / interest expense)

what is the formula for total asset turnover

(net sales / average total assets)

what is the debt to equity ratio

(total liabilities / total equity)

managements ______ and ______ begins with an overview, followed by critical accounting policies, and a discussion of operating results and financial condition. It is an excellent point in understanding a company's business activities.

1. discussion 2. analysis

what 6 sections make up the analysis report?

1. executive summary 2. analysis overview 3. evidential matter 4. assumptions 5. key factors 6. inferences

all of the following are standards used in financial analysis for comparisons:

1. intracompany 2. competitor 3. industry 4. guidelines

vertical analysis is a tool to evaluate individual financial statement items or a group of items. When analyzing income statement accounts, the base is usually _________ and for balance sheet accounts the base is usually total ________

1. revenue 2. assets

visualizations are used to identify:

1. sources of financing 2. investing activities

Vito Co. had current assets of $9,000 and current liabilities of &6,000 at the end of the year. net income during the year was $21,000. The current ratio for the period is:

1.5 Reason: Current ratio = current assets/current liabilities

Net sales for a company are $250,000. Average accounts receivable are $10,000. The accounts receivable turnover for this company is

25 Reason: accounts receivable turnover = net sales / average accounts receivable

(Internal/External) _____ users of accounting information rely on financial statement analysis to make more informed decisions when pursuing their goals.

External

True or False: Small dollar changes can yield large percent changes consistent with their importance

False

_____ analysis is a form of horizontal analysis that can reveal patterns in data across periods. It is computed by taking the (analysis period amount/base period amount) x 100.

Trend