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13 Cards in this Set
- Front
- Back
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profitability ratios
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measure the income or operating success of a company or a given period of time; earnings per share
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liquidity ratios
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measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash
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solvency ratios
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measure the ability of the company to survive over a long period of time
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earnings per share
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measures net income earned on each share of common stock; divide net income by average number of common shares outstanding during the year
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working capital
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measure of liquidity; difference between the amounts of current assets and current liabilities
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Current Ratio
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current assets divided by current liabilities; liquidity ratio: 1.44:1 means has $1.44 of current assets for every $1 of current liabilities
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solvency
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ability to pay interest as it comes due and to repay the balance of a debt due at its maturity
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debt to total assets ratio
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measure percentage of total financing provided by creditors rather than stockholders; total liabilities divided by total assets; higher the percentage less chance of being able to repay debt; 54% means every dollar of assets was financed by 54 cents of debt.
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free cash flow
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describes the cash remaining from operating activities after adjusting for capital expeditures and dividends paid.
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relevant: useful characteristic
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if it would make a difference in a business decision; must be timely
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reliability: useful characteristic
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information can be depended on; must be verifiable; factual-faithful representation; neutral-can't favor one set of interested users over another
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comparability: useful characteristic
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use same accounting principles as U.S. regulates; must disclose the accounting methods used
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consistency: useful characteristic
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company uses the same accounting principles and methods from year to year.
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