Final (Ch. 3)

Question 1

Common Size Statements

Answer 1

• Financial statement in percentage form

Question 2

Financial Ratios

Answer 2

• Relationships determined from a firm’s financial information and used for comparison purposes

Question 3

DuPont Identity

Answer 3

• Popular expression breaking ROE into three parts: operating efficiency, assets use efficiency, and financial leverage

Question 4

Internal Growth Rate

Answer 4

• The maximum possible growth rate a firm can achieve without external financing of any kind

Question 5

Sustainable

Answer 5

• The maximum possible growth rate a firm can achieve without external equity financing while maintaining a constant debt-equity ratio

Question 6

Standard Industrial Classification (SIC) Codes

Answer 6

• U.S. Government code used to classify a firm by its type of business operations