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Operating, Investing, or Financing?
Financial Statement Analysis
Ratio Identification
Vocabulary
Miscellaneous
100
Issuance of common stock
Financing Inflow
100
When performing a vertical analysis on an income statement, by what value do you divide each number?
Net Sales
100
Debt-to-equity ratio
Total liabilities / total equity
100
What type of analysis from the chapter is used in preparing common size financial statements?
Vertical Analysis
100
What kind(s) of accounts are affected by investing activities?
Long-term/Plant assets
200
Decrease in Accounts Payable
Operating Outflow
200
When performing a vertical analysis on a balance sheet, by what value do you divide each number?
Total Assets (or Total Liabilities and S.H. Equity)
200
Profit margin
Net Income / Net Sales
200
What kind of analysis involves the calculation of percentage changes in comparative financial statements?
Horizontal Analysis
200
What value per share do you assign to the stock issued in a small stock dividend?
Current market value
300
Purchased equipment
Investing Outflow
300
Name a ratio where a decrease in the value would be favorable for the business.
Debt ratio, debt-to-equity ratio, days' sales in receivables, days' sales in inventory
300
Current ratio
Current Assets / Current Liabilties
300
What ratio measures the amount of net income for each share of outstanding common stock?
Earnings per share
300
What is the formula to find gross profit percentage?
Gross profit / Net Sales
400
Paid out dividends to stockholders
Financing Outflow
400
Acid-test (quick) ratio
(Cash + Accounts Receivable) / Current Liabilities
400
What ratio measures a company's ability to pay off interest expense?
Times-interest earned ratio
400
Under what percentage of total shares outstanding must a stock dividend be to be considered a "small" stock dividend?
20-25%
500
Depreciation expense - equipment
Operating Inflow
500
Name an account that would be included in the calculation of the current ratio, but not the acid-test (quick) ratio.
Inventory, Prepaid Rent, Prepaid Insurance
500
Earnings per share
(Net Income - Preferred Dividends) / Average number of common shares outstanding
500
What's the formula for free cash flow?
Net cash from operating activities - Cash payments for investing - cash dividends
500
What is the correct order of the following items on the income statement? Discontinued Operations, Net Income, Income from continuing operations, Extraordinary items, Income tax expense, Income before tax
1. Income before tax 2. Income tax expense 3. Income from continuing operations 4. Discontinued operations 5. Extraordinary items 6. Net Income