10/18/24, 10:44 AM
Foundations of Accounting for Peregrine Global Services
with complete solutions
Terms in this set (131)
provide information that is useful for making investments and other economic
Financial statements
decisions about business
Analysis of percentage increases and decreases in financial statements across time.
Horizontal analysis The amount of each line item on the most recent statement is compared with the
related item on earlier statements, and expressed as a percentage change
An percentage analysis that is used to show the relationship of each component to
the total within a single statement.
Vertical analysis The balance sheet is analyzed by stating each asset item as a percent of total assets.
Each liability and stockholders equity item is stated as a percent of total liabilities
and stockholders equity.
Horizontal and vertical analyses are useful in assessing trends, in relationships and
Common side statements
financial conditions, and operations of a business
Common size income statements can compare to businesses or more
Solvency and profitability The ability of a business to repay its debts and earn income
Focuses on the ability of a business to pay, or otherwise satisfy its current and
Solvency analysis
noncurrent liabilities
Current position analysis, working capital Using metrics to assess a business, is ability to pay its current liabilities
Current ratio current assets divided by current liabilities
Quick ratio quick assets/current liabilities
sales on account increase accounts receivable, whereas collections from customers
decrease accounts receivable. It is desirable to collect receivables as promptly as
Accounts Receivable analysis possible. The cash generated by prompt collections from customers may be used to
pay or avoid current liabilities and be used in operations for purposes, such as
purchasing merchandise in large quantities at lower prices.
Accounts Receivable Turnover Ratio net credit sales/average net accounts receivable
number of days' sales in receivables Average Accounts Receivable / Average Daily Sales
Foundations of Accounting for Peregrine
Inventory turnover ratio cost of goodsGlobal Services
sold/average inventory
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, 10/18/24, 10:44 AM
ratio of fixed assets to long-term liabilities is a solvency measure that indicates the
Ratio fixed assets to long-term liabilities margin of safety for node holders and bond holders. It also indicates the ability of a
business to borrow additional funds on a long-term basis.
Claims against the total assets of a business are divided into two groups, one claims
of creditors and two claims of owners. The relationship between the total claims of
Ratio of liabilities to stockholders equity
the creditors and owners is a solvency measure that indicates the margin of safety for
creditors.
The higher, the ratio, the lower, the risk that interest payments will not be made, if
Time Interest Earned earnings decrease. Dividing the sum of the income before taxes and interest
expense.
Profitability analysis focuses, primarily on the relationship between operating results
as reported in the income, statement and resources available to the business as
Profitability and market analysis
reported on the balance sheet. Market analysis focuses on how well a company is
doing from the financial markets perspective.
The ratio of net income to net sales is a profitability measure that is often called the
Return on Sales net profit margin. The ratio shows how much of each dollar and sales flows through
the net income after all expenses are subtracted.
The return on assets is computed by adding interest, expense to net income, and
Return on Assets Ratio
dividing the sum by the average total assets.
Return on stockholders equity Dividing net income by average total stockholders equity
Difference in the rate of return on stockholders equity, and the rate of return on
Leverage
assets.
subtracting preferred dividend requirements, from net income, and dividing this
Return on common equity ratio
amount by average common stockholders equity
Earnings per share net income - preferred dividends / weighted average common shares outstanding
Dividing the market price per share of common stock at a specific date by the annual
Price earnings ratio
earnings per share
Dividing the dividends, distributed to common stockholders during the period by the
Dividends per share
number of common shares, outstanding
Dividing the annual dividends, paid per share of common stock by the market price
Dividend yield
per share on a specific date
a percentage analysis that is used to show Vertical analysis
the relationship of each component to the
total within a single statement is a
Analysis of percentage increases and Horizontal analysis
decreases in financial statements across
time is a
percentage analysis, ratios, turnovers, and false
other measures of financial position and
operating results are useful analytic
measures in our all you need an assessing a
business is past performance and
predicting its future
the process by which management plans, evaluates, and controls investments in
Capital investment analysis
fixed assets
Capital investment evaluation methods 1. methods that do not use present values
2. Methods that use present values
Foundations of Accounting for Peregrine Global Services
2/6
Foundations of Accounting for Peregrine Global Services
with complete solutions
Terms in this set (131)
provide information that is useful for making investments and other economic
Financial statements
decisions about business
Analysis of percentage increases and decreases in financial statements across time.
Horizontal analysis The amount of each line item on the most recent statement is compared with the
related item on earlier statements, and expressed as a percentage change
An percentage analysis that is used to show the relationship of each component to
the total within a single statement.
Vertical analysis The balance sheet is analyzed by stating each asset item as a percent of total assets.
Each liability and stockholders equity item is stated as a percent of total liabilities
and stockholders equity.
Horizontal and vertical analyses are useful in assessing trends, in relationships and
Common side statements
financial conditions, and operations of a business
Common size income statements can compare to businesses or more
Solvency and profitability The ability of a business to repay its debts and earn income
Focuses on the ability of a business to pay, or otherwise satisfy its current and
Solvency analysis
noncurrent liabilities
Current position analysis, working capital Using metrics to assess a business, is ability to pay its current liabilities
Current ratio current assets divided by current liabilities
Quick ratio quick assets/current liabilities
sales on account increase accounts receivable, whereas collections from customers
decrease accounts receivable. It is desirable to collect receivables as promptly as
Accounts Receivable analysis possible. The cash generated by prompt collections from customers may be used to
pay or avoid current liabilities and be used in operations for purposes, such as
purchasing merchandise in large quantities at lower prices.
Accounts Receivable Turnover Ratio net credit sales/average net accounts receivable
number of days' sales in receivables Average Accounts Receivable / Average Daily Sales
Foundations of Accounting for Peregrine
Inventory turnover ratio cost of goodsGlobal Services
sold/average inventory
1/6
, 10/18/24, 10:44 AM
ratio of fixed assets to long-term liabilities is a solvency measure that indicates the
Ratio fixed assets to long-term liabilities margin of safety for node holders and bond holders. It also indicates the ability of a
business to borrow additional funds on a long-term basis.
Claims against the total assets of a business are divided into two groups, one claims
of creditors and two claims of owners. The relationship between the total claims of
Ratio of liabilities to stockholders equity
the creditors and owners is a solvency measure that indicates the margin of safety for
creditors.
The higher, the ratio, the lower, the risk that interest payments will not be made, if
Time Interest Earned earnings decrease. Dividing the sum of the income before taxes and interest
expense.
Profitability analysis focuses, primarily on the relationship between operating results
as reported in the income, statement and resources available to the business as
Profitability and market analysis
reported on the balance sheet. Market analysis focuses on how well a company is
doing from the financial markets perspective.
The ratio of net income to net sales is a profitability measure that is often called the
Return on Sales net profit margin. The ratio shows how much of each dollar and sales flows through
the net income after all expenses are subtracted.
The return on assets is computed by adding interest, expense to net income, and
Return on Assets Ratio
dividing the sum by the average total assets.
Return on stockholders equity Dividing net income by average total stockholders equity
Difference in the rate of return on stockholders equity, and the rate of return on
Leverage
assets.
subtracting preferred dividend requirements, from net income, and dividing this
Return on common equity ratio
amount by average common stockholders equity
Earnings per share net income - preferred dividends / weighted average common shares outstanding
Dividing the market price per share of common stock at a specific date by the annual
Price earnings ratio
earnings per share
Dividing the dividends, distributed to common stockholders during the period by the
Dividends per share
number of common shares, outstanding
Dividing the annual dividends, paid per share of common stock by the market price
Dividend yield
per share on a specific date
a percentage analysis that is used to show Vertical analysis
the relationship of each component to the
total within a single statement is a
Analysis of percentage increases and Horizontal analysis
decreases in financial statements across
time is a
percentage analysis, ratios, turnovers, and false
other measures of financial position and
operating results are useful analytic
measures in our all you need an assessing a
business is past performance and
predicting its future
the process by which management plans, evaluates, and controls investments in
Capital investment analysis
fixed assets
Capital investment evaluation methods 1. methods that do not use present values
2. Methods that use present values
Foundations of Accounting for Peregrine Global Services
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