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HB 311: Chapter 3 Terms
Who interprets information about companies and makes recommendations to investors? |
Financial Analysts |
What is a firm's primary source of financial information? |
Annual Report |
Who are annual report's biased to? |
Management |
What 3 activities is the statement of cash flows concerned with? |
Operating, Investing, and Financing |
What type of activity occurs when a company borrows money, pays off loans, sells stock, or pays dividends? |
Financing Activities |
What type of activity occurs when a firm buys or sells fixed assets or long-term purchases/sales of financial assets? |
Investing Activities |
Have to do with running the business on a day-to-day basis |
Operating Activites |
What activities deal with capital accounts, long-term debt, and equity? |
Financing Activities |
What is more important: cash or net income? |
Cash; a company can still go out of business even if they are earning an accounting profit |
Cash available for distribution to common stockholders |
Free cash flow (which means cash is generated beyond reinvestment needs) |
Which statement presents each line item as a percent of revenue? |
Common size income statement |
What are the 5 classifications of ratios? |
Liquidity, asset management, debt management, profitability, and market value |
What do liquidity ratios measure? |
Ability to meet short-term financial obligtions |
What do debt management ratios show? |
How effectively the firm uses other people's money and whether it's using too much borrowed money |
What do asset management ratios show? |
How the company uses its resources to generate revenue/profit and to avoid costs. |
What do profitability ratios show? |
How successful the venture is in making money |
What do market value ratios show? |
How investors feel about the future of the company |
What do asset management ratios show? |
How the company uses its resources to generate revenue/profit and to avoid costs. |
What type of ratios are: current assets & quick ratio(acid test) |
Liquidity Ratios |
Average collection period (ACP), inventory turnover ratio, and fixed/total asset turnovers are what type of ratios? |
Asset Management Ratios |
Times Interest earned (TIE), cash coverage, and fixed charge coverage are what types of ratios? |
Debt Management Ratios |
Return on sales (ROS), Return on equity (ROE), and Return on assets (ROA) are what type of ratios? |
Profitability Ratios |
P/E and market to book value are what type of ratios? |
Market Value Ratios |
What do Du Pont equations express? |
Relationships between ratios that give insights into successful operations |