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Foundations of Accounting for Peregrine Global Services questions with 100% accurate answers
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Foundations of Accounting for PeregrineGlobal Services
Financial statements - answersprovide information that is useful for making investments
and other economic decisions about business
Horizontal analysis - answersAnalysis of percentage increases and decreases in
financial statements across time.
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
Vertical analysis - answersAn percentage analysis that is used to show the relationship
of each component to the total within a single statement.
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.
Common side statements - answersHorizontal and vertical analyses are useful in
assessing trends, in relationships and financial conditions, and operations of a business
Common size income statements - answerscan compare to businesses or more
Solvency and profitability - answersThe ability of a business to repay its debts and earn
income
Solvency analysis - answersFocuses on the ability of a business to pay, or otherwise
satisfy its current and noncurrent liabilities
Current position analysis, working capital - answersUsing metrics to assess a business,
is ability to pay its current liabilities
Current ratio - answerscurrent assets divided by current liabilities
, Quick ratio - answersquick assets/current liabilities
Accounts Receivable analysis - answerssales on account increase accounts receivable,
whereas collections from customers decrease accounts receivable. It is desirable to
collect receivables as promptly as 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 - answersnet credit sales/average net accounts
receivable
number of days' sales in receivables - answersAverage Accounts Receivable / Average
Daily Sales
Inventory turnover ratio - answerscost of goods sold/average inventory
Ratio fixed assets to long-term liabilities - answersratio of fixed assets to long-term
liabilities is a solvency measure that indicates the 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.
Ratio of liabilities to stockholders equity - answersClaims 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 the creditors and owners is a solvency
measure that indicates the margin of safety for creditors.
Time Interest Earned - answersThe higher, the ratio, the lower, the risk that interest
payments will not be made, if earnings decrease. Dividing the sum of the income before
taxes and interest expense.
Profitability and market analysis - answersProfitability analysis focuses, primarily on the
relationship between operating results as reported in the income, statement and
resources available to the business as reported on the balance sheet. Market analysis
focuses on how well a company is doing from the financial markets perspective.
Return on Sales - answersThe ratio of net income to net sales is a profitability measure
that is often called the net profit margin. The ratio shows how much of each dollar and
sales flows through the net income after all expenses are subtracted.
Return on Assets Ratio - answersThe return on assets is computed by adding interest,
expense to net income, and dividing the sum by the average total assets.
Return on stockholders equity - answersDividing net income by average total
stockholders equity
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