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Foundation of Accounting from peregrine global Exam
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Foundation of Accounting fromperegrine global Exam
Financial statements - -provide information that is useful for making
investment and other economic decisions about businesses
-horizontal analysis - -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. When horizontal analysis is used to
compare data from two or more dates or periods, amounts from the earliest
statement are used as the base for computing percentage increases and
decreases. While computing the percentage change in various financial
statement line items is straightforward, interpreting the significance of the
increases and decreases usually benefits from additional information.
-vertical analysis - -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. Although
vertical analysis is a technique that is applied to an individual statement,
comparative vertical analyses are useful.
-The times interest earned ratio is computed as blank___________ . - -income
before tax plus interest expense divided by interest expense
-accelerating the collection of receivables will tend to cause the accounts
receivable turnover to blank___________ . - -increase
-_______ is NOT used in assessing a company's ability to pay current
liabilities. - -return on equity
-the ability of a business to repay its debts and to earn income is referred to
as blank___________ . - -solvency and profitability
-An analysis in which all the components of an income statement are
expressed as a percentage of net sales is called blank___________ . - -vertical
analysis
-The primary advantages of the average rate of return method are its ease
of computation and the fact that blank_______ . - -it emphasizes the amount
of income earned over the life of the proposal
-When analysis of an investment proposal by the net present value method
indicates that the present value exceeds the amount to be invested,
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