financial statement analysis is useful for quizlet

Solvency 3. Which of the following circumstances will cause sales to fixed assets to be abnormally high? Vertical analysis is a tool to evaluate individual financial statements items or a group of items in terms of a specific base amount. Which of the following statements best represents an analysis of the long-term debt position of these two firms? Which of the following ratios is rated to be a primary measure of liquidity and considered of highest significance rating of the liquidity ratios a bank analyst? Which of the following ratios appears most frequently in annual reports? PLAY. Financial statement analysis emphasizes four areas of inquiry--with varying degrees of importance. Gravity. At a more r Which of the following could cause return on assets to decline when net profit margin is increasing? Which of the following does not bear on the quality of receivables? Growth 5. Most common types are: Current Ratiomeasures the extent of the number of current assets to current liabilities. So depending on how the company is doing, they will either hold onto their stock, sell it or buy more. Financial analysis can be used to detect apparent liquidity problems. Which suppliers of funds bear the greatest risk and should therefore earn the greatest return? A financial analysis may also be an assessment of the value and safety of debtors’ claims against the company’s assets. Profitability 6. Created by. Which of the following will not cause times interest earned to drop? 2. Learn analysis financial statement with free interactive flashcards. Considering the different requirements of internal management, the content of financial statement analysis is very extensive. Rates of Return 10. The current ratio, also known as the working capital ratio, measures the capability of measures a company’s ability to pay off short-term liabilities with current a… The role of financial statement analysis is to use financial report prepared by companies, combined with other information, to evaluate the past, current and potential performance and financial position of a company for the purpose of making investment, credit and other economic decisions. provides a snapshot of a company's financial position as of a certain date, items of value such as inventory and equipment are financed with liabilities(debt) or stockholders' equity(owners' shares), reports the company's profitability during an accounting period, amounts recieved from customers for products sold or services provided, reports if the earnings of this accounting period are distributed as dividends or retained in the business as retained earnings. One firm is large and the other is small. Also reports amounts paid by stockholders to purchase common stock and preferred stock, Retained earnings + Net Income - (Dividends), Contributed capital, beginning + issuance of shares - (Repurchase to retire shares), reports cash inflows + cash outflows during an accounting period, amounts to be recieved in the future from customers, amounts that the corporation must pay to suppliers in the future, portion of assets the owners are free and clear of any liabilities, amounts paid by stockholders to purchase common stock and preferred stock, Net income earned by the company since its incorporation and not yet distributed as dividends, largest expense item which reports the wholesale costs of inventory sold during the accounting period, relate to a company's main business: selling products or services to earn net income, relate to the need for investing in property, plant, and equipment or expanding by making investments in other companies, relate to how a company finances its assets with debt or stockholders' equity, rules that management must follow when preparing financial statements available to investors, most accounting reporting standards that formulate GAAP are set by the 7 full time voting members, attest to whether a company's financial statements comply with the GAAP rules, defines ethical behavior code of professional conduct, establish auditing standards and conduct inspections of the public accounting firm that perform audits, legislative authority to set the reporting rules for accounting info of publicly held corporations, states that companies should record assets and services at their acquisition cost, the amount paid for them, because this is the most reliable information, compares all amounts within one year to revenue of that same year, compares all amounts within on year to total assets of that same year, a company's ability to pay liabilities as they come due in the next year, a company's ability to pay liabilities for many years into the future, expected to be converted into cash, sold, or consumed within the next 12 months, actual currency, bank accounts, and investments that can be liquidated immediately, Monies to be recieved by the company from customers, cost of television programs that will be aired during the next year, cost allocated to each year of the assets life, total amount of depreciation expensed since the assets' date of purchase, patents, trademarks, and copyrights that have value but not any physical presence, extra value that is recorded when buying another company, borrowing corporation records bonds payable, entity loaning the money records a bond recievable, entities owning shares of stock are the owners of the corporation, refer to revenues from the sale of merchandise, Indicate that returns or discounts were subtracted from total sales, revenues are recorded in the period earned, not necessarily in the period that the company collects the money, idea that accountants usually record transactions when they occur, not necessarily when cash is recieved or paid, records transactions when cash is recieved or paid, equals the difference between revenues and cost of sales, includes all costs of generating sales besides cost of sales, Subtracting operating expenses from gross profit (Income from Operations), arise from the sale of long-lived assets or investments, accountants deem unusual and infrequent, may appear in the bottom section of the income statement, recored when a company closes down or sells part of its business, highly unusual transactions that are considered unusual in nature and infrequent in occurence, measures how efficiently you can generate desired outputs from given inputs, shares are bought and sold on stock exchanges such as the New york stock exchange, when a company sells stock to the public for the first time as a publicly traded corporation, stock bought back from investors not recorded as an asset because it is impossible for a company to own itself, the total number of shares actually held by investors at a given time, a legal value assigned to each share of stock, carries a dividend rate which must be paid to preferred stockholders before any dividends can be paid to common stockholders, recorded in stockholders equity 1. unrealized gains/losses on certain securities 2. 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