Chapter 2 Finance 'Introduction to Financial Statement Analysis
Which of the following is considered to be a financing activity?
Making a dividend payment
The market-to-book ratio is the ratio of:
market value of equity to the accounting value of equity
DuPont analysis relates ROE to:
profitability, asset efficiency and leverage
details on leasing activities
Financial statements also have extensive notes where companies provide additional information such as:
Which of the following is considered a current liability?
Accounts payable
The three main financial statements are the balance sheet, the income statement and the statement of cash flows. However, there is a fourth financial statement known as the:
statement of stockholders' equity
Sarbanes-Oxley Act
stiffening penalties for false information
Financial statements also have extensive notes where companies provide additional information such as:
details on leasing activities
The financial statements include an introduction known as the management discussion and analysis. This preface must contain information about:
off-balance sheet transactions
EBITDA, or earnings before interest, taxes, depreciation and amortization, shows how much cash a firm has earned from:
operations
Retained earnings are the sum of:
previous years' of earnings less dividends
Generally accepted accounting principles
-Accountants prepare financial statement using a set of guidelines established by the profession to ensure that all financial statements are comparable.
Financial Statements
-Accounting reports issued by a firm periodically (usually quarterly, and annually) that present past performance information and a snapshot of the firm's assets and the financing of those assets.
Acid-test ratio
-Current assets minus inventories over current liabilities is called
Accounts receivable are:
credit sales that have not been collected
Making a dividend payment
is classified as a financing activity on the statement of cash flows.
Net income
is the type of income that may be distributed to the company's owners or reinvested in the company.
Value of the firm's underlying business
-The enterprise value adds the total market value of the firm's equity and debt and then subtracts out the most liquid components.
A firm with 18.25 days sales in inventory has an inventory turnover of:
20
Since accounting principles differ among countries, the overall global trend is for firms to begin using:
International Financial Reporting Standards
International Financial Reporting Standards
Since accounting principles differ among countries, the overall global trend is for firms to begin using:
Given that Company Y's current stock price is $51.50 per share, and the company's most recent earnings were $2.32 a share, Company Y's P/E ratio is 22.2 times.
The P/E ratio is an abbreviation for price-to-earnings ratio and is calculated by taking the $51.50 share price and dividing by the $2.32 in earnings. This gives us $51.50/$2.32 = 22.2 times. This means that Company Y is currently trading at a multiple of 22.2 times the most recent earnings. P/E ratios provide managers with some idea of how the market perceives the company's future. Higher P/Es indicate extreme enthusiasm. P/E ratios are never denominated in dollars and do not represent a percentage.
value of the firm's underlying business
The enterprise value adds the total market value of the firm's equity and debt and then subtracts out the most liquid components to obtain the:
statement of stockholders' equity
The three main financial statements are the balance sheet, the income statement and the statement of cash flows. However, there is a fourth financial statement known as the:
Any publicly-traded U.S. firm must file quarterly financial statements and annual financial statements with the __________ and also send an annual report that includes their financial statements to their shareholders.
U.S. Securities and Exchange Commission
Net working capital equals:
current assets minus current liabilities
The enterprise value adds the total market value of the firm's equity and debt and then subtracts out the most liquid components to obtain the
value of the firm's underlying business