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Chapter 17
Term | Definition |
---|---|
Profitability ratio | The ratio that measures the ability of a business to generate income |
Benchmark | A standard used to compare financial performance |
Comparative financial statements | Financial statements that provide information for multiple fiscal periods |
Trend analysis | An analysis of changes over time |
Profit margin | Net income after federal income tax as a percent of net sales |
Gross margin | Gross profit as a percent of net sales |
Operating margin | Income from operations as a percent of net sales |
Operating expenses ratio | Total operating expenses as a percent of net sales |
Solvency ratio | A ratio that measures the ability of a business to pay its long term liabilities |
Debt ratio | Total liabilities divided by total assets |
Horizontal analysis | A comparison of one item on a financial statement with the same item on a previous period's financial statement |
Earnings per share | Net income after federal income tax divided by the number of understanding shares of stock |
Market ratio | A ratio that measures a corporations financial performance in relation to the market value of its stock |
Dividend yield | The relationship between dividends per share and market price per share |
Price-earnings ratio | The relationship between the market value per share and earnings per share of a stock |
Liquidity ratio | A ratio that measures the ability of a business to pay its current financial obligations |
Working capital | The amount of current assets less current liabilities |
Current ratio | A ratio that measures the relationship of current assets to current liabilities |
Quick assets | Cash and other current assets that can be quickly converted into cash |
Quick ratio | A ratio that measures the relationship of quick assets to current liabilities |