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24 Cards in this Set

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Horizontal Analysis
The change in an account from year to year. The difference is shown in a dollar amount and a % of the earlier year.
Vertical Analysis
(common-size statement)
Shows the relationship of an account to the total within a sigle statement.

Vertical Analysis of Income Statement:
Revenues = % of net revenues
Expenses = % of net revenues

Vertical Analysis of Balance Statement:
Assets = % of total assets
Liabilities & SE = % total liab. & SE
Working Capital

(solvency analysis)
The ability to meet current maturing obligations.

Current Assets - Current Liabilities
Current Assets
Cash
Accounts Receivables
Marketable Securities
Prepaid Expense
Inventory
Quick Assets
Cash
Accounts Receivable
Marketable Securities
Prepaid Expense
Current Ratio

(solvency analysis)
The ability to meet current maturing obligations.

Current Assets / Current Liabilities
Quick Ratio
To indicate instant debt-paying ability

Quick Assets / Current Liabilities
Accounts Receivable Turnover

(solvency analysis)
To assess the efficiency in collecting receivables and in the management of credit.

Net Sales / Avg. AR
Number of Days' Sales in Receivables

(solvency analysis)
To assess the efficiency in collecting receivables and in the management of credit.

Avg. AR / Avg. Daily Sales

Avg. Daily Sales = Net Sales / 365
Inventory Turnover

(solvency analysis)
To assess the efficiency in the management of inventory.

COGS / Avg. Inventory
Number of Days' Sales in Inventory

(solvency analysis)
To assess the efficiency in management of inventory.

Avg. Inventory / Avg. Daily COGS
Ratio of Fixed Assets to Long-Term Liabilities

(solvency analysis)
To indicate the margin of safety to long-term creditors.

Fixed Assets (net) / Long-Term Liabilities
Ratio of Liabilities to Stockholders' Equity

(solvency analysis)
To indicate the margin of safety to creditors.

Total Liabilities / Total SE
Number of Times Interest Charges Earned

(solvency analysis)
To assess the risk to debtholders in terms of number of times interest charges were earned.

(Income B4 Income Tax + Interest Expense)
/ Interest Expense
Ratio of Net Sales to Assets

(profitability analysis)
To assess the effectiveness in the use of assets.

Net Sales / Avg. Total Assets (excluding long-term investments)
Rate Earned on Total Assets

(profitability analysis)
To assess the profitability of the assets.

(Net Income + Interest Expense) / Avg. Total Assets
Rate Earned on Stockholders' Equity

(profitability analysis)
To assess the profitability of the investment by stockholders

Net Income / (Avg. Total SE)
Rate Earned on Common SE

(profitability analysis)
To assess the profitability of the investment by common stockholders

(net income - preferred dividends) / avg. common SE
Earnings per Share on Common Stock

(profitability analysis)
To assess the profitability of the investment by common stockholders

(net income - preferred dividends) / share of common stock outstanding
Price-Earnings Ratio

(profitability analysis)
To indicate future earnings prospects, based on the relationship between market value of common stock and earnings

(market price per share of common stock) / (earnings per share of common stock)
Dividends per Share of Common Stock

(profitability analysis)
To indicate the extent to which earnings are being distributed to common stockholders

Dividends / (shares of common stock outstanding)
Dividend Yield

(profitability analysis)
To indicate the rate of return to common stockholders in terms of dividends

(dividends per share of common stock) / (market price per share of common stock)
# times interest is earned
amount available to meet interest charges
÷ interest

amt available to meet interest charges = net income + interest expense
Rate Earned on Total Assets

aka. return on assets
amt available for interest charges /
average total assets

-- profitability of assets