BUS 210 FINAL EXAM ACTUAL QUESTIONS AND
ANSWERS GRADED A+
✔✔Balance sheet - ✔✔A financial statement that presents the financial position of the
company on a particular date. The financial position is assets = liabilities + stockholder's
equity.
✔✔Vertical analysis - ✔✔Expressing each item in a financial statement as a percentage
of the same base amount. For instance, income statement items as a percentage of
sale or balance sheet items as a percentage of total assets.
✔✔Horizontal analysis - ✔✔Used to analyze financial statement data for a single
company over time. Calculates the amount and percentage change in an account from
last year to this year.
✔✔Risk ratio - ✔✔Measures to analyze whether a company is able to pay its current
and long term liabilities.
✔✔Profitability ratio - ✔✔Measures the earnings or operating effectiveness of a
company over a period of time. Investors use these as the number one measure of
company success.
✔✔Liquidity - ✔✔A company's ability to pay current liabilities
✔✔Solvency - ✔✔A company's ability to pay its long term liabilities
✔✔Gross profit ratio - ✔✔Ratio that measures the portion of each dollar of sales
remaining after covering the cost of goods
✔✔operating income - ✔✔Income used to predict future earnings/net income or profit. It
will continue or persist into future years
✔✔Quality of earnings - ✔✔Ability of reported earnings (income) to reflect true earnings,
as well as usefulness of reported earnings to predict future earnings.
✔✔Receivables turnover - ✔✔Measures how many times, on average, a company
collects its receivables during the year
✔✔Inventory turnover - ✔✔Measures how many times, on average, a company sells its
entire inventory during the year
✔✔Return on assets - ✔✔Measures the incomes earned on each dollar in assets
✔✔Profit margin - ✔✔Measures the income earned on each dollar of sales
ANSWERS GRADED A+
✔✔Balance sheet - ✔✔A financial statement that presents the financial position of the
company on a particular date. The financial position is assets = liabilities + stockholder's
equity.
✔✔Vertical analysis - ✔✔Expressing each item in a financial statement as a percentage
of the same base amount. For instance, income statement items as a percentage of
sale or balance sheet items as a percentage of total assets.
✔✔Horizontal analysis - ✔✔Used to analyze financial statement data for a single
company over time. Calculates the amount and percentage change in an account from
last year to this year.
✔✔Risk ratio - ✔✔Measures to analyze whether a company is able to pay its current
and long term liabilities.
✔✔Profitability ratio - ✔✔Measures the earnings or operating effectiveness of a
company over a period of time. Investors use these as the number one measure of
company success.
✔✔Liquidity - ✔✔A company's ability to pay current liabilities
✔✔Solvency - ✔✔A company's ability to pay its long term liabilities
✔✔Gross profit ratio - ✔✔Ratio that measures the portion of each dollar of sales
remaining after covering the cost of goods
✔✔operating income - ✔✔Income used to predict future earnings/net income or profit. It
will continue or persist into future years
✔✔Quality of earnings - ✔✔Ability of reported earnings (income) to reflect true earnings,
as well as usefulness of reported earnings to predict future earnings.
✔✔Receivables turnover - ✔✔Measures how many times, on average, a company
collects its receivables during the year
✔✔Inventory turnover - ✔✔Measures how many times, on average, a company sells its
entire inventory during the year
✔✔Return on assets - ✔✔Measures the incomes earned on each dollar in assets
✔✔Profit margin - ✔✔Measures the income earned on each dollar of sales
