Bus 1B Chapter 13

Days' sales uncollected is computed by taking _______, net divided by net sales multiplied by 365.

accounts recievable

____________ is a useful measure in evaluating inventory liquidity. It is computed by taking ending inventory divided by cost of goods sold multiplied by 365.

days' sales in inventory

Most users rely on _________ ___________ financial statements, which include the (1) income statement, (2) balance sheet, (3) statement of stockholders' equity, (4) statement of cash flows, and (5) notes to these statements.

general purpose

_____ refers to a company's ability to generate an adequate return.

profitability

what is the acid test ratio formula?

quick assets (cash+ short-term investments + current receivables)/ current liabilities

are widely used tools of financial analysis that can help us uncover conditions and trends difficult to detect by inspecting individual amounts.

ratios

________ ___________ financial statements express each item as a percent of a base amount. The base amount is assigned a value of 100%.

common size

what is the inventory turnover formula?

cost of goods sold/average inventory

The ______ ratio measures a company's market expectations for future growth.

price earnings

what is the days' sales collected formula?

(accounts receivable/ net sales)*365

Trend percent is computed by

(analysis period amount/ base period amount) *100

what is the days' sales in inventory formula?

(ending inventory/ cost of goods sold)*365

What is the times interest earned ratio?

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

what is the gross margin ratio formula?

(net sales - cost of goods sold)/ net sales

what are the types of vertical analysis?

1. common size statements 2. data visualizations

what are the types of horizontal analysis?

1. comparative statements 2. trend analysis

what are the types of ratio analysis?

1. current ratio 2.acid test ratio 3.accounts receivable turnover 4. inventory turnover

what are the 6 parts of a financial statement analysis?

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

What are the standards (benchmarks) for analyzing financial statements?

1. intracompany 2.competitor 3.industry

what are the 4 building blocks of financial analysis?

1. liquidity and efficiency 2. solvency 3. profitability 4. market prospects

in vertical analysis what is the base amount in an income statement and in a balance sheet?

1. revenue (net sales) 2. total assets

what is the purpose of days' sales in inventory ratio?

How long inventory is turned into cash

what is the purpose of times interest earned ratio?

a company's ability to pay interest

what does the price earnings ratio mean?

a company's market expectations for future growth

A comparison of a company's financial condition and performance across time is called _______ analysis.

horizontal

what does days' sales uncollected measure?

how frequently a company collects accounts receivables

what is the purpose of accounts receivable turnover ratio?

how frequently a company converts acc recievables into cash

what is the purpose of inventory turnover ratio?

how long a company holds inventory before selling it

The measure of how long a company holds inventory before selling it is called the

inventory turnover

what is the purpose of acid-test ratio?

it evaluates a company's short term liquidity

what is the price earnings ratio formula?

market price per common share/ earnings per share

what is the return on total assets formula?

net income/ average total assets

what is the return on equity formila?

net income/ average total equity

what is the profit margin formula?

net income/net sales

what is the accounts receivable turnover ratio formula?

net sales/ average acc. recievable

what is the purpose of current ratio?

to evaluate a company's ability to pay its short-term obligations.