Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Textbook Question
Chapter 13, Problem 13.2KTQ
Quiz 2:
Solvency
Debt-to-equity ratio
Times interest earned ratio
Debt service coverage ratio
Cash flow from operations to capital expenditures ratio
Profitability
Return on assets ratio
Return on sales ratio
Asset turnover ratio
Return on common stockholders’ equity ratio
Leverage
Earnings per share (EPS)
Price/earnings (P/E) ratio
Dividend payout ratio
Dividend yield ratio
- A measure of a company’s success in earning a return for the common stockholders.
- The relationship between a company’s performance according to the income statement and its performance in the stock market.
- The ability of a company to remain in business over the long term.
- A variation of the profit margin ratio; measures earnings before payments to creditors.
- A company’s bottom line stated on a per-share basis.
- The percentage of earnings paid out as dividends.
- The ratio of total liabilities to total stockholders’ equity.
- A measure of the ability of a company to finance long-term asset acquisitions with cash from operations.
- A measure of a company’s success in earning a return for all providers of capital.
- The relationship between net sales and average total assets.
- The relationship between dividends and the market price of a company’s stock.
- The use of borrowed funds and amounts contributed by preferred stockholders to earn an overall return higher than the cost of these funds.
- An income statement measure of the ability of a company to meet its interest payments.
- A statement of cash flows measure of the ability of a company to meet its interest and principal payments.
- How well management is using company resources to earn a return on the funds invested by various groups.
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- The average liabilities, average stockholders' equity, and average total assets are as follows: 1. Determine the following ratios for both companies, rounding ratios and percentagesto one decimal place: a. Return on total assets b. Return on stockholders' equity c. Times interest earned d. Ratio of total liabilities to stockholders' equity 2. Based on the information in (1), analyze and compare the two companies'solvency and profitability. Comprehensive profitability and solvency analysis Marriott International, Inc., and Hyatt Hotels Corporation are two major owners and managers of lodging and resort properties in the United States. Abstracted income statement information for the two companies is as follows for a recent year (in millions): Balance sheet information is as follows:arrow_forwardOwners equity represents which of the following? A. the amount of funding the company has from issuing bonds B. the sum of the retained earnings and accounts receivable account balances C. the total of retained earnings plus paid-in capital D. the business owners/owners share of the company, also known as net worth or net assetsarrow_forwardThe cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnoverarrow_forward
- Which of the following ratios is used to measure a firms profitability? a. Liabilities Ă· Equity c. Sales Ă· Assets b. Assets Ă· Equity d. Net Income Ă· Net Salesarrow_forwardRetained earnings is accurately described by all except which of the following statements? A. Retained earnings is the primary component of a companys earned capital. B. Dividends declared are added to retained earnings. C. Net income is added to retained earnings. D. Net losses are accumulated in the retained earnings account.arrow_forwardWhen analyzing a companys debt to equity ratio, lithe ratio has a value that is greater than one, then the company has: a. equal amounts of debt and equity. c. less debt than equity. b. more debt than equity. d. none of these.arrow_forward
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