Ch 18 Financial Statement Analysis

Question 1

horizontal analysis

Answer 1

A technique for evaluating a series of financial statement data over multiple periods to determine the percentage increase or decrease that has taken place. (p. 958)

Aka trend analysis

Question 2

horizontal percentage change for period

Answer 2

A percentage measuring the change from one period to the next period. It is calculated by dividing the dollar amount of the change between the specific period under analysis and the prior period by the prior-period amount. (p. 960)

Question 3

liquidity ratios

Answer 3

Measures of a company’s short-term ability to pay its maturing obligations and to meet unexpected needs for cash. (p. 968)

Question 4

percentage of the base-year amount

Answer 4

A percentage measuring the change since a base period. It is calculated by dividing the amount for the specific period under analysis by the base-period amount multiplied by 100%. (p. 960)

Question 5

profitability ratios

Answer 5

Measure of a company’s operating success for a specific period of time. (p. 968)

Question 6

ratio analysis

Answer 6

A technique for evaluating financial statements that expresses the relationship between selected financial statement data. (p. 959)

Question 7

solvency ratios

Answer 7

Measures of a company’s ability to survive over a long period of time. (p. 968)

Question 8

trend analysis

Answer 8

A technique for evaluating a series of financial statement data over multiple periods of time to determine the percentage increase or decrease that has taken place. (p. 960)

Aka horizontal analysis

Question 9

vertical analysis

Answer 9

A technique for evaluating financial statement data within a period. Each item in a financial statement is expressed as a percentage of a total or base amount. Total assets is usually the base amount used in the balance sheet; total revenues or net sales in the income statement. (p. 958)

Aka common size analysis