Chapter 18 vocab Flashcards
accounts receivable turnover
measure of the liquidity of accounts receivable; computed by dividing net credit sales by average net accounts receivable.
acid-test ratio
dividing sum of cash, short term investments, and net accounts receivable by current liabilities
asset turnover
computed by dividing net sales by average total assets.
current ratio
current assets/current liabilities
debt to assets ratio
total liabilities/total assets
discontinued operations
The disposal of a significant component of a business.
earnings per share
net income - preferred dividends/ weighted-average common shares outstanding
horizontal analysis
a technique for evaluating a series of financial statement data over a period of time to determine increase/decrease
inventory turnover
cost of goods sold/average inventory
liquidity ratios
Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.
other comprehensive income
Includes all changes in stockholders’ equity during a period except those resulting from investments by stockholders and distributions to stockholders.
payout ratio
computed by dividing cash dividends declared on common stock by net income.
price-earnings ratio
computed by dividing the market price per share by earnings per share.
profit margin
computed by dividing net income by net sales.
profitability ratios
Measures of the income or operating success of a company for a given period of time.
ratio
The relationship may be expressed either as a percentage, a rate, or a simple proportion.
ratio analysis
A technique for evaluating financial statements that expresses the relationship between selected financial statement data.
return on assets
computed by dividing net income by average total assets.
return on common stockholders equity
computed by dividing net income minus preferred dividends (if any) by average common stockholders’ equity.
solvency ratio
Measures of the ability of the company to survive over a long period of time.
sustainable income
The most likely level of income to be obtained by a company in the future.
times interest earned
computed by dividing the sum of net income, interest expense, and income tax expense by interest expense.
trading on the equity
Borrowing money at a lower rate of interest than can be earned by using the borrowed money.
vertical anaylsis
A technique for evaluating financial statement data that expresses each item within a financial statement as a percentage of a base amount.
