Zack A.

What is the Working Capital equation? What is its use?

~ Current Assets - Current Liabilities

~ To indicate the ability to meet currently maturing obligations

What is the Current Ratio equation? What is its use?

~ Current Assets / Current Liabilities

~ To indicate the ability to meet currently maturing obligations

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What is the Quick Ratio equation? What is its use?

~ Quick Assets / Current Liabilities

~ To indicate instant debt-paying ability

What is the Ratio of Liabilities to Stockholders' Equity equation? What is its use?

~ Total Liabilities / Total Stockholders' Equity

~ To indicate the margin of safety to creditors

What is the Ratio of Net Sales to Assets equation? What is its use?

~ Net Sales / Average Total Assets (Excluding long-term investments)

~ To assess the effectiveness in the use of assets

What is the Rate Earned on Total Assets equation? What is its use?

~ Net Income + Interest Expense / Average Total Assets

~ To assess the profitability of the assets

What is the Rate Earned on Stockholders' Equity? What is its use?

~ Net Income / Average Total Stockholders' Equity

~ To assess the profitability of the investment by stockholders

What is the Earnings per Share on Common Stock equation? What is its use?

~ Net Income - Preferred Dividends / Shares of Common Stock Outstanding

~ To assess the profitability of the investment by common stockholders

What is the Price-Earnings Ratio equation? What is its use?

~ Market Price per Share of Common Stock

/

Earnings per Share on Common Stock

~ To indicate future earnings prospects, based on the relationship between market value of common stock and earnings

What is the percentage analysis of increases and decreases in related items in comparative financial statements?

Horizontal Analysis

What is the percentage analysis of the relationship of each component in financial statement to a total within the statement ?

Vertical Analysis

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