2nd topic

Question 1

is the proecss an individual goes through to analyze a companys various financial documents to make an informed decision about that business

Answer 1

Financial Statement Analysis

Question 2

2 methods of financial statement analysis

Answer 2

Computation Phase
Interpretation Phase

Question 3

is the comparison of financial statements by representing each line item on the statement as a percentage of another line item

Answer 3

Vertical Analysis

Question 4

A determination of the percentage increase or decrease in an account from a base time period to successive time periods

Answer 4

Horizontal Analysis

Question 5

it is conducted to help financial statement users recognize important financial changes that unfold over time

Answer 5

Horizontal Analysis

Question 6

profit is affected by three basic items

Answer 6

Sales price
Sales volume
Costs

Question 7

three ways in solving for the factors that affects gross profit

Answer 7

3-way variance analysis
4 way variance analysis
6 way variance analysis

Question 8

is a relative magnitude of two selected numerical values taken from enterprise financial statements

Answer 8

Financial Ratios

Question 9

Measure a relationship between two or more components of financial statements

Answer 9

Financial Ratios

Question 10

Relate to the companys performance in the current period

Answer 10

Profitability Ratios

Question 11

Shows the company’s ability to generate income

Answer 11

Profitability ratios

Question 12

They indicate how effectively a company generates profit and value for shareholders

Answer 12

Profitability ratios

Question 13

shows how a successful business is in earning profits over a period of time in relation to operation costs, revenue and shareholders equity

Answer 13

Profitability ratio

Question 14

5 profitability ratios

Answer 14

gross profit margin
operating profit margin
net profit margin
return on assets
return on equity

Question 15

it compares the amount of net income to the average stock holders equity

Answer 15

Return on Equity

Question 16

which depicts return on equity as the profit margin times total asset turn over times the equity multiplier

Answer 16

DuPoint Model

Question 17

it indicates how much profit was made

Answer 17

gross profit percentage

Question 18

it indicates the sales revenue generated for each peso invested in assets during the period

Answer 18

Asset Turnover

Question 19

it indicates how much revenue the company generates for each peso invested in fixed assets

Answer 19

Fixed asset turnover

Question 20

It indicates the earnings generated for each share of outstanding common stocks

Answer 20

Earnings per share

Question 21

It indicates the number of pesos required to buy Php1.00 of earnings

Answer 21

Price /earnings Ratio

Question 22

It measures the rate of return on the investors common stock investments

Answer 22

Dividend yield

Question 23

It indicated the proportion of earnings distributed as dividends

Answer 23

Dividend Payout

Question 24

relate to the companys short-term survival

Answer 24

Liquidity Ratio

Question 25

It shows the companys ability to use current assets to repay liabilities as they become due

Answer 25

Liquidity ratio

Question 26

it measures the short-term ability of the enterprise to pay its obligations

Answer 26

Liquidity Ratio

Question 27

it measured the company’s ability to pay its current liabilities

Answer 27

current ratio

Question 28

are cash, short-term investments and accounts receivables

Answer 28

Quick ratio

Question 29

it measures the number of times that the current liabilities could be paid using cash and marketable securities

Answer 29

Cash ratio

Question 30

it is the time required to complete one collection cycle from the time receivables are recorded

Answer 30

Receivables Turnover

Question 31

it indicates how frequently inventory is bought and sold during the year.

Answer 31

Inventory Turn over

Question 32

It measures the number of times that the inventory is replaced during the period

Answer 32

Inventory Turnover

Question 33

It indicates how frequently raw materials are bought and used in production

Answer 33

Raw materials Inventory Turnover

Question 34

It indicates how frequently goods in process are continued and finished

Answer 34

goods in process turnover

Question 35

shows how long the operating cycle of the company is

Answer 35

Days in operating Cycle

Question 36

it indicates the time required to complete one payment cycle from the time the payables are recorded

Answer 36

Trade Payables turnover

Question 37

it shows the time from when the cash is used in operations to the time is converted to cash again

Answer 37

Cash Conversion Cycle

Question 38

It measured the movement and utilization of current assets to meet operating requirements

Answer 38

current asset turnover

Question 39

relate the company’s long-term survival

Answer 39

Solvency Ratio

Question 40

It shows the company’s ability to repay lenders when
debt matures and to make the required interest
payments prior to the date of maturity

Answer 40

Solvency Ratio

Question 41

proportion of assets provided by creditors compared to that provided by owners

Answer 41

Debt to Equity Ratio

Question 42

It indicates the proportion of total assets that creditors finance

Answer 42

Debt to assets

Question 43

It indicates how many times the companys interest expense was covered by its net operating income

Answer 43

Time interest Earned

Question 44

Proportion of total assets provided by creditors

Answer 44

Debt Ratio

Question 45

Proportion of total assets provided by owners

Answer 45

Equity Ratio

Question 46

It is useful whenever the company estimates an
increase its future sales level

Answer 46

Sales Forecast

Question 47

Functional areas of modern financial management

Answer 47

Determining financial needs
Choosing the sources of funds
Financial analysis and interpretation
Cost-Volume-Profit Analysis
Working Capital Management
Dividend Policy
Capital budgeting