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62 Cards in this Set
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 Back
Statements that are useful for comparing companies of different sizes, particularly in the same industry:

Standardized financial statements


Liquidity ratio that removes inventory, which may take time to convert to cash and may be overstated:

Quick ratio


Standardized financial statements that compute all accounts as a percent of total assets:

Commonsize balance sheets


_____ allow for better comparison through time or between companies:

Ratios


What are the 2 problems with having a high current ratio?

1) Lower profitability
2) Ties up money that could be used elsewhere 

Ratios that measure how well a company has its interest obligations covered:

Coverage ratios


Standardized financial statements that compute all line items as a percent of sales:

Commonsize income statements


What is depreciation considered to be?

A noncash expense


What is the most stringent test of liquidity?

Cash ratio


Ratio that is important to examine industry norms:

Current ratio


What are the 4 asset management, or turnover, measures?

1) inventory turnover
2) days' sales in inventory 3) receivables turnover 4) days' sales in receivables 5) total asset turnover 

Liquidity ratios measure a firm's ability to meet its _____ obligations:

Shortterm


A higher current ratio means ____ ____.

Lower profitability


A more stringent test than a current liquidity ratio:

Quick ratio


_____ make it easier to compare financial information, particularly as the company grows:

Standardized statements


What are the 3 types of leverage ratios?

1) total debt ratio
2) debt/equity 3) equity multiplier 

How much investors are willing to pay per dollar of current earnings:

Priceearnings ratio


Profit per dollar of sales:

Profit margin


_____ is a(n) noncash expense.

Depreciation


Leverage ratios measure a firm's ability to meet its _____ obligations.

Longterm


Compares the market value of the firm's investments to their cost:

Markettobook ratio


What measures how efficiently a firm uses its assets to generate sales?

Asset management, or turnover, measures


Profit per dollar of equity:

Return on equity


What are the 2 types of coverage ratios?

1) times interest earned ratio
2) cash coverage ratio 

Measures how efficiently the firm uses its assets and how efficiently the firm manages its operations:

Profitability measures


Profit per dollar of assets:

Return on assets


What are the 2 types of market value measures?

1) priceearnings ratio
2) markettobook ratio 

Ratios that measure a firm's ability to meet its longterm obligations:

Leverage ratios


Ratios that measure the firm's ability to meet its shortterm obligations:

Liquidity ratios


The percentage of net income paid to stockholders:

Divident payout ratio


How many times inventory is turned over during the year:

Inventory turnover


A measure of the firm's financial leverage:

Equity multiplier


Ratio of at least 1 with 1.52 being more common:

Current ratio


A measure of the firm's operating efficiency:

Profit margin


How many days inventory sits on average before it is sold:

Days' sales in inventory


What are the 3 types of profitability measures?

1) profit margin
2) return on assets 3) return on equity 

Tells us how much the firm can grow by using internally generated funds and issuing debt to maintain a constant debt ratio:

Sustainable growth rate


A measure of asset use efficiency:

Total asset turnover


The percentage of net income retained in the firm:

Retention ratio


How many times receivables are turned over during the year:

Receivables turnover


Equity multiplier is a measure of the firm's _____.

Financial leverage


How many days it takes to collect on credit sales on average:

Days' sales in receivables


How well the firm manages its assets:

Asset use efficiency


What are the 2 internal uses of financial statements?

1) Performance Evaluation  compensation and comparison b/t divisions
2) Planning For The Future  guide in estimating future cash flows 

Profit margin is a measure of the firm's _____.

Operating efficiency


Tells us how much the firm can grow assets using retained earnings as the only source of financing:

Internal growth rate


What is used to see how a firm's performance is changing through time?

Timetrend analysis


_____ are not very helpful by themselves; they need to be compared to something:

Ratios


How well the firm controls costs:

Operating efficiency


What are the 4 determinants of growth?

1) profit margin
2) total asset turnover 3) financial leverage 4) divident policy 

A measure of the firm's asset use efficiency:

Total asset turnover


A benchmark used to make comparisons between similar companies or companies within industries:

Peer group analysis


Total asset turnover is a measure of the firm's _____.

Asset use efficiency


Having a higher _____ ratio means lower profitability.

Current


What are the 6 problems w/fiancial statement analysis?

1) no underlying financial theory
2) finding comparable firms 3) what to do w/ conglomerates, multidivisional firms 4) differences in accounting practices 5) differences in capital structure 6) seasonal variations, onetime events 

It is not unusual for _____ to be < 1, especially if a firm has a large amount of fixed assets.

Total asset turnover


A financial ratio that illustrates the combined effect of profitability, total asset turnover, and leverage on return on equity:

Du Pont identity


Which ratio would be used to measure the firm’s ability to pay its bills on time?

Liquidity ratios


Measures how well a firm uses its assets to generate sales:

Total asset turnover


Which ratio would be used to measure the number of times interest can be paid out of earnings?

Times interest earned ratio


What does a profit margin of 0.10 mean?

For each $1 of sales generated by the firm it earns 10 cents in net income.


When will ROA = ROE?

If the debt to equity ratio is zero
