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Flashcards in Chapter 4 Deck (13)
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1
Q

financial statement analysis

A

the use of financial statements to analyze a company’s performance and assess its strengths and weaknesses

2
Q

trend analysis

A

analysis of trends in financial data over time

3
Q

benchmark

A

a standard against which performance is measured

4
Q

common-size financial statement

A

a financial statement in which each number is expressed as a percentage of a base number, such as total assets or net revenues (net sales)

5
Q

financial ratio

A

A number from a financial statement that has been scaled by dividing by another financial number

6
Q

return on equity (ROE):

A

ROE

Net income /Stockholders’ equity

7
Q

short-term liquidity ratios or short-term solvency ratios

A

focus on whether the firm has the ability to convert current assets into cash quickly without loss of value.

8
Q

insolvency

A

the inability to pay debts when they are due

9
Q

Current ratio=

A

=Current assets/ Current liabilities

10
Q

Quick Ratio

A

The quick ratio is similar to the current ratio except that inventory is subtracted from current assets in the numerator

11
Q

quick ratio—or acid-test ratio=

A

we divide current assets, less inventory, by current liabilities

12
Q

Quick ratio

A

Current assets /Inventory

Current liabilities

13
Q

efficiency ratios or asset turnover ratios

A

which measure how efficiently a firm uses it assets