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accounting 6
accounting chapter 6 WGU C213
| Term | Definition |
|---|---|
| financial statement analysis | areas in which additional data must be gathered: significant transactions market share info competitors plans customer demand forecast |
| financial ratio | relationship between financial statement amounts |
| debt retio | measure leverage taking total liabilities divided by total assets debt ratio = total liabilities / total assets |
| liquidity | companies ability to pay its debt in the short run |
| current ratio equation | comparison of current assets (cash, receivables and inventory) with current liabilities. current ratio = current assets/ current liabilites |
| return on sales equation | return on sales = net income/sales |
| asset turn over equation | asset turnover= sales/ total assets |
| return on equity | the overall measure of the performance of a company return on equity= net income / stockholders equity |
| price-earning ratio | an equity valuation multiple PE ratio= market value of shares/ net income |
| common-size financial statments | all amount for a given year being shown as a percentage of tat denominal for the year |
| DuPont framework | a systematic approach to identifying general factors causing ROE to deviate from the normal |
| average collection period | shows the average number of days that elapse between sale and cash collection |
| number of days sales of invesntories | average inventory/ average daily cost of goods sold= average number of days of sale that can be made using only the supply of inventory on hand |
| fixed asset turnover equation | sales / average fixed assets = fixed asset turnover |
| return on assets | net income / total assets= return on assets |
| margin | profitability of each dollar in sales |
| turnover | degree to which assets are used to generate sales |
| leverage | borrowing that allows a company to purchase more assets than its stockholders are able to pay for through their own investment |
| debt- to- equity ratio | total liabilties / total equity = debt to equity ratio |
| cash flow adequacy ratio | cash from operations/ expenditures for fixed assets additions and aquations of new business |
| cash times intrest earned ratio | financial analysis toll that indicates intrest payment ability of an entity |
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