Exam 3 CH. 15 Flashcards
liquidity
is a company’s ability to convert assets into cash
solvency
is a company’s ability to make its periodic interest payments and repay the
face amount of debt at maturity
profitability
is a company’s ability to generate earnings
horizontal analysis
The analysis of increases and decreases in the amount and percentage
of comparative financial statement items
vertical analysis
The percentage analysis of the relationship of each component in a financial
statement to a total within the statement
current position analysis
valuates a company’s ability to pay its
current liabilities (includes WORKING CAPITAL, QUICK RATIO, and CURRENT RATIO)
working capital equation
Working Capital =
Current Assets
–
Current Liabilities
Current Ratio equation
(provided on exam)
Current Ratio =
current assets
/ divided by
current liabilities
Quick Ratio equation
(provided on exam)
quick ratio =
quick assets
/ divided by
current liabilities
times interest earned equation
(provided on exam)
times interest earned =
(income before income tax expense
+ plus
interest expense)
/ divided by
interest expense
dividend yield equation
(provided on exam)
dividend yield =
dividends per share of common stock
/ divided by
market price per share of common stock
Horizontal analysis equation (dollar change)
current year amount - base year amount
Horizontal analysis equation (percent change)
(current year amount
minus -
base year amount)
/ divided by
base year amount
- times 100
vertical analysis (percent) calculation
Taking each element
/ dividing (always) by total revenue
vertical analysis (dollar change) equation
later year dollar amount
-
earlier year dollar amount
