HMGT 3311 Final Exam

What is Horizontal Analysis? - Answer-Compares changes in a given line item between two consecutive periods (i.e., Cash in 20X0 vs. 20X1). What is Vertical Analysis? - Answer-Relative weight of various line items to a base (i.e., current assets as a percent of total assets) What is Trend Analysis? - Answer-Trend analysis extends the concept of horizontal analysis over multiple time periods, using the first year as the base year. What is the purpose of Ratio Analysis? - Answer-Provide information about the financial performance of an organization which goes beyond that which is available from analyzing only one line item at a time. What are the 4 Categories of Ratios? - Answer-Liquidity; Revenue, Expense, and Profitability; Activity; and Capital Structure. Liquidity answers? - Answer-How well is the organization positioned to meet its short-term obligations? Revenue, Expense and Profitability ratios answer? - Answer-How profitable is an organization?" and 2) "How effective is it in controlling its operating costs and increasing its operating revenues? Activity ratios answers? - Answer-How efficiently is the organization using its assets to produce revenues? Capital structure ratios answers? - Answer-How are the organization's assets financed?"; and 2) "How able is the organization to take on new debt? How capital structure ratios help? - Answer-Analyze the organization's ability to pay off its long-term debts. How Liquidity ratios help? - Answer-Analyze the organization's ability to pay off its short-term obligations What is the function of working Capital - Answer-That a health care organization collects its funds, pays its employees, buys its supplies, and pays its creditors. Although non-current assets provide the capacity to provide service, current assets and current liabilities are used to turn that capacity into service