Academic Wiki

 Chapter 14 Questions

Questions

1. Cash, income, cash flow.

2. They disclose hints about accounting methods and other outstanding circumstances that the company may have.

3. Comparative financial statements allow analysts to compare companies within an industry.

4. Analysts want to be able to see trends by comparing year-to-year ratios.

8. Financial leverage shows how much of a company’s income is being financed by debt.

9. The usefulness of this ratio depends on what industry is being analyzed.

10. Current ratio is based on current liabilities and current assets.  The Quick ratio also uses current liabilities, however it only considers cash and assets that are short-term enough to be cash.

Exercises

1. 

3. a. Current ratio: 1.66 (60,000/36,000)

b. Current ratio: 1.63 (59,000/36,000)