BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

Solutions

Chapter
Section
Chapter 14, Problem 1DQ
Textbook Problem

Briefly explain the difference between liquidity, solvency, and profitability analysis.

Expert Solution
To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the capabilities,

profitability, and overall performance of a company.

To determine: the differences between liquidity, solvency, and profitability ratios.

Explanation of Solution

In general, as said above, financial ratios are mainly used for evaluation of the liquidity, capabilities, profitability, and overall performance of a company.

 Thus, following are the financial ratios and its measure:

  • Liquidity ratio: Liquidity ratios are used to measure the ability of the company towards fulfilling the obligations and requirements of the cash at the short-term.  Some of the ratios are current ratio, acid-test ratio, inventory turnover ratio, and accounts receivable ratio.
  • Solvency ratio: Next, solvency ratios are those ratios used to measure the ability of the company towards survival for a longer period.
  • Profitability ratio: Profitability ratios are those ratios used to measure the extent of income for particular time period.
Conclusion

Thus, above are the differences between liquidity, solvency, and profitability ratios.

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Chapter 14 Solutions

Financial & Managerial Accounting
Ch. 14 - Horizontal analysis The comparative accounts...Ch. 14 - Vertical analysis Income statement information for...Ch. 14 - Current position analysis The following items are...Ch. 14 - Accounts receivable analysis A company reports the...Ch. 14 - Inventory analysis A company reports the...Ch. 14 - Long-term solvency analysis The following...Ch. 14 - Times interest earned A company reports the...Ch. 14 - Asset turnover A company reports the following:...Ch. 14 - Return on total assets A company reports the...Ch. 14 - Common stockholders' profitability analysis A...Ch. 14 - Earnings per share and price-earnings ratio A...Ch. 14 - Vertical analysis of income statement Revenue and...Ch. 14 - Vertical analysis of income statement The...Ch. 14 - Common-sized income statement Revenue and expense...Ch. 14 - Vertical analysis of balance sheet Balance shed...Ch. 14 - Horizontal analysis of the income statement Income...Ch. 14 - Current position analysis The following data were...Ch. 14 - Current position analysis PepsiCo, Inc., the...Ch. 14 - Current position analysis The bond indenture for...Ch. 14 - Accounts receivable analysis The following data...Ch. 14 - Accounts receivable analysis Xavier Stores Company...Ch. 14 - Inventory analysis The following data were...Ch. 14 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - Asset turnover Three major segments of the...Ch. 14 - Profitability ratios The following selected data...Ch. 14 - Profitability ratios Ralph Lauren Corporation...Ch. 14 - Six measures of solvency or profitability The...Ch. 14 - Five measures of solvency or profitability The...Ch. 14 - Earnings per share, price-earnings ratio, dividend...Ch. 14 - Price-earnings ratio; dividend yield The table...Ch. 14 - Earnings per share, discontinued operations The...Ch. 14 - Income statement and earnings per share for...Ch. 14 - Unusual items Explain whether Colston Company...Ch. 14 - Comprehensive Income Anson Industries, Inc....Ch. 14 - Horizontal analysis of income statement For 20V2,...Ch. 14 - Vertical analysis of income statement For 20Y2,...Ch. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency, and profitability...Ch. 14 - Solvency and profitability trend analysis Addai...Ch. 14 - Horizontal analysis of income statement For 20Y2,...Ch. 14 - Vertical analysis of income statement For 20Y2,...Ch. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency and profitability...Ch. 14 - Solvency and profitability trend analysis Crosby...Ch. 14 - Financial Statement Analysis The financial...Ch. 14 - Continuing Company AnalysisAmazon, Best Buy, and...Ch. 14 - Deere: Profitability analysis Deere Company...Ch. 14 - Marriott and Hyatt: Solvency and profitability...Ch. 14 - Ethics in Action Rodgers Industries Inc. completed...Ch. 14 - Communication The president of Freeman Industries...

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