Managerial Accounting Ch 14 – Flashcards

Measures a company's ability to collect cash from credit customers. To compute accounts receivable turnover, divide net credit sales bt average net accounts receivable

Ratio of the sum of cash plus short term investments plus net current receivables to total current liabilities. It tells whether the entity can pay all of its current liabilities if they come due immediately; also called the quick ratio.

The practice of comparing a company with other companies or industry averages

Common stockholders' equity divided by the number of shares of common stock outstanding. It is the recorded amount for each share of common stock outstanding

A financial statement that reports only percentages (no dollar amounts)

Current assets divided by current liabilities. It measures the ability to pay current liabilities with current assets.

Ratio of average net accounts receivable to one day's sale. It indicates how many days' sales remain in Accounts Receivable awaiting collection.

Ratio of total liabilities to total assets. It shows the proportion of a company's assets that is financed with debt.

Ratio of the dividends per share of stock to the stock's market price per share. It tells the percentage of a stock;s market value that the company returns to stockholders annually as dividends

Amount of a company's net income for each share of its outstanding common stock.

Study of percentage changes in comparative financial statements

Ratio of income from operations to interest expense. It measures the number of times that operating income can cover interest expense; also called the times-interest earned ratio.

Ratio of cost of goods sold to average inventory. It indicates how rapidly inventory is sold

Earning more income on borrowed money than related interest expense, thereby increasing the earnings for the owners of the business; also called the trading on equity.

Ratio of the market price of a share of common stock to the company's earning per share. It measures the value that the stock market places on $1 of a company's earnings

Net income minus preferred dividends divided by average common stockholders' equity. It is a measure of profitability; also called return on equity.

Ratio of net income to net sales. It is a measure of profitability; also called return on sales

Net income Plus interest expense divided by average total assets. This ratio measures a company's success in using its assets to earn income for the people who finance the business; also called return on assets.

Evaluating the relationships between two or more key components of the financial statements.

Ratio of income from operations to interest expense. It measure the number of times operating income can cover interest expense; also called the interest-coverage ratio.

Earning more income on borrowed money than the related interest expense, thereby increasing the earnings for the owners of the business; also called leverage.

A form of horizontal analysis in which percentages are computed by selecting a base year as 100% and expressing amounts for following years as a percentage of the base amount

Analysis of a financial statement that reveals the relationship of each statement item to a specified base, which is the 100% figure.

Current assets minus current liabilities; measures a business's ability to meet its short-term obligations with its current assets