Exam (elaborations)
Peregrine Exam Day 4|78 Questions with complete Solutions
Peregrine Exam Day 4|78 Questions with complete Solutions
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Peregrine Exam Day 4|78 Questions withcomplete Solutions
retained earnings - -An amount earned by a corporation and not yet
distributed to stockholders.
-Business generate earnings that can be - -postive and negative
-Retained Earnings Equation - -Beginning Retained Earnings + Net Income -
Dividends = Ending Retained Earnings
-Retained Earnings tell - -A company generates surplus income
-Inventory Turnover - -cost of goods sold/average inventory
-Inventory turnover helps - -businesses make better decisions on pricing,
manufacturing, marketing and purchasing new inventory.
-A low turnover implies - -weak sales and possibly excess inventory
-High ratio turnover implies - -either strong sales or insufficient inventory.
-Return on Assets - -Indicates the amount of net income generated for each
dollar invested in assets
-ROA is best used when - -comparing similar companies or comparing a
company to its previous performance.
-ROA takes into account - -companies debt and Return on Equity
-ROA formula - -Net Income/Total Assets
-net sales - -sales less sales returns and allowances and sales discounts
-Cost of Goods Sold - -the total cost of merchandise sold during the period
-Selling, General, and Administrative Expenses - -operating expenses, plus
the depreciation and amortization of assets
-Total cost or expenses - -Income sheet
-Operating Income - -profitability from normal operations that equals gross
profit less operating expenses
, -Net Interest Expense - -income statement
-Net Income - -the difference between total revenue and total expenses
when total revenue is greater
-Operating Margin - -profit a company makes on a dollar of sales after
paying for variable costs but before paying any interest or taxes
-Operating Margin Ratio - -operating income/sales
-Operating margin is a - -profitability ratio that shows how much profit a
company makes from its core operations in relation to the total revenues it
brings in
-EBIT - -is the same metric as operating income and can be used in
calculating operating margin
-Operating margin helps - -investors understand how a business makes
money; if its generating income primarily from core operations, or
investments.
-An increasing operating margin - -over a period of time indicates a
company whose profitability is improving.
-financial reporting - -Process of communicating information relevant to
investors, creditors, and others in making investment, credit, and business
decisions.
-What is included in financial reporting? - -income statement, statement of
comprehensive income, balance sheet, statement of cash flows, and
statement of stockholders' equity
-Current Ratio - -current ratio is a liquidity ratio that measures a companies
ability to pay short-term obligations or those due within one year.
-current ratio compares - -current assets to current liabilities
-Also referred to as working capital - -current ratio
-Weaknesses of the current ratio - -difficulty of comparing the measure
across industry groups, overgeneralization of specific asset and liability
balances, and the lack of trending information.
-Free Cash Flow - -represents the cash available for the company to repay
creditors or pay dividends and interest to investors
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