Definitions

Question 1

Common stock

Answer 1

Basic form of capital stock

Question 2

Paid in capital

Answer 2

Capital from investments by stockholders

Question 3

Dividends

Answer 3

Distributions by a corporation to its stockholders

Question 4

Legal capital

Answer 4

Portion of stockholders equity maintained for protection of creditors

Question 5

Outstanding stock

Answer 5

Stock in the hands of stockholders

Question 6

Par value

Answer 6

Arbitrary amount assigned to a share of stock at time of incorporation

Question 7

Preferred stock

Answer 7

Stock that gives owners certain advantages over common stockholders

Question 8

Retained earnings

Answer 8

Capital earned through profitable operation of the business

Question 9

Treasury stock

Answer 9

A corporations own stock that it reacquires

Question 10

Stockholder’s equity

Answer 10

Paid in capital + retained earnings

Question 11

Inventory turnover

Answer 11

Indicates how rapidly inventory is sold

Question 12

Interest coverage ratio

Answer 12

Measures a business ability to pay interest in its debt

Question 13

Quick ratio

Answer 13

Tells whether a company can pay its current liabilities if they become due immediately

Question 14

Dividend yield

Answer 14

Tells the % of stock market’s value that the company returns to stockholders

Question 15

Return on assets

Answer 15

Measures a company’s success in using assets to earn income

Question 16

Accounts receivable turnover

Answer 16

Measures a company’s ability to collect cash from credit customers

Question 17

Benchmarking

Answer 17

The practice of comparing a company with other companies that are similar

Question 18

Debt ratio

Answer 18

Shows the proportion of a company’s assets that is financed with debt

Question 19

Horizontal analysis

Answer 19

The percentage change in the line items on comparative financial statements