Chapter 23 - Financial Statement Analysis Flashcards
1
Q
VERTICAL ANALYSIS
vertical analysis
A
- computing the relationship between each item on a financial statement to some base amount on the statement
- on the income statement :
- each item is expressed as a percentage of net sales
- on the balance sheet :
- each item is expressed as a percentage of total assets or total liabilities and stockholders’ equity
2
Q
VERTICAL ANALYSIS
horizontal analysis
A
- computing the percentage change for the individual items in the financial statements from year to year
3
Q
VERTICAL ANALYSIS
ratio analysis
A
- computing the relationship between various items in the financial statements
4
Q
VERTICAL ANALYSIS
comparative statements
A
- financial statements presented side by side for two or more years
5
Q
VERTICAL ANALYSIS
common size statements
A
- financial statements with items expressed as percentages of a base amount
6
Q
HORIZONTAL ANALYSIS
trend analysis
A
- comparing selected ratios and percentages over a period of time
7
Q
HORIZONTAL ANALYSIS
industry averages
A
- financial ratios and percentages reflecting averages for similar companies
8
Q
RATIOS
return on common stockholders’ equity
A
- a measure of how well the corporation is making a profit for its shareholders; the ratio of net income available for common stockholders to common stockholders’ equity
9
Q
RATIOS
price earnings ratio
A
- the ratio of the current market value of common stock to earnings per share of that stock
10
Q
RATIOS
asset turnover
A
- a measure of the effective use of assets in making sales; the ratio of net sales to total assets
11
Q
RATIOS
total equities
A
- the sum of a corporation’s liabilities and stockholders’ equity
12
Q
RATIOS
leveraged buyout
A
- purchasing a business by acquiring the stock and obligating the business to pay the debt incurred
13
Q
RATIOS
liquidity
A
- the ability of a business to pay its debts when due
14
Q
RATIOS
working capital
A
- the measure of the ability of a company to meet its current obligations; the excess of current assets over current liabilities
15
Q
RATIOS
current ratio
A
- a measure of the ability of a business to pay its current debts using current assets; the ratio of current assets to current liabilities
