AUDITING RMU
11th Edition
ISBN: 9781260934830
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 5, Problem 5.16RQ
To determine
Introduction: Financial ratios are used in order to determine the relationship between various items of the financial statements and comparing them with the previous year’s performance or with any other firm in the industry and accordingly take decisions.
To explain: The four categories of financial ratios.
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Cite all the ratios used in Financial Statements and briefly describe the use of each ratio.
Explain the purpose of ratio analysis, and list the four maincategories of financial ratios.
List and define 4 of the common financial ratios
Chapter 5 Solutions
AUDITING RMU
Ch. 5 - Prob. 5.1RQCh. 5 - Prob. 5.2RQCh. 5 - Prob. 5.3RQCh. 5 - Prob. 5.4RQCh. 5 - Prob. 5.5RQCh. 5 - Prob. 5.6RQCh. 5 - Prob. 5.7RQCh. 5 - Prob. 5.8RQCh. 5 - Prob. 5.9RQCh. 5 - Prob. 5.10RQ
Ch. 5 - Prob. 5.11RQCh. 5 - Prob. 5.12RQCh. 5 - Prob. 5.13RQCh. 5 - Prob. 5.14RQCh. 5 - Prob. 5.15RQCh. 5 - Prob. 5.16RQCh. 5 - Prob. 5.17MCQCh. 5 - Prob. 5.18MCQCh. 5 - Prob. 5.19MCQCh. 5 - Prob. 5.20MCQCh. 5 - Prob. 5.21MCQCh. 5 - Prob. 5.22MCQCh. 5 - Prob. 5.23MCQCh. 5 - Prob. 5.24MCQCh. 5 - Prob. 5.25MCQCh. 5 - Prob. 5.26MCQCh. 5 - Prob. 5.27MCQCh. 5 - Prob. 5.28MCQCh. 5 - Prob. 5.29MCQCh. 5 - Prob. 5.30PCh. 5 - Prob. 5.31PCh. 5 - Prob. 5.32PCh. 5 - Prob. 5.33PCh. 5 - Prob. 5.34PCh. 5 - Prob. 5.35PCh. 5 - Prob. 5.36PCh. 5 - Prob. 5.37PCh. 5 - Prob. 5.38PCh. 5 - Prob. 5.39P
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Similar questions
- List five ratios that are automatically provided by the vertical analysis of income statements.arrow_forwardList and briefly describe the five categories of business ratios.arrow_forwardFinancial ratios Draw the balance sheet and the income statement. Compare them with the items and figures on the statementarrow_forward
- Below are three ratios introduced in your text. Describe the purpose for each of them, and also state the formula for calculating them: a. Revenue Per Employee Ratio: b. Quick Ratio: c. Fixed Assets Ratio:arrow_forwardExplain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.arrow_forwardIdentify five limitations of ratios as a tool of financial analysis.arrow_forward
- Financial ratios can be divided into four categories, depending upon the purpose of the analysis. Discuss the four categories: internal liquidity, operating performance, risk analysis and growth analysis.arrow_forward1. What is and describe the “five question approach” to using financial ratios?arrow_forwardWrite down how ROE, the single best accounting measure, can be split into three different categories ratios.arrow_forward
- How is a financial ratio analysis performed? Comparing two items in financial statements. Evaluating the balance sheet Assessing the income statementarrow_forwardis the statement which indicates the relationship of different items of financial statement with some common item by expressing each item as a percentage of such common item a. Comparative statement b. Ratio statement c. Common size statement d. Trend Analysisarrow_forward5. Know the calculations for all of the following ratios (see ratio sheet that can be used on the exam) and know the category (listed in Question 4) they fall in: Formula Category/Use Ratio Working Capital Current Assets - Current Liabilities Net credit sales/Average Accounts Receivable Turnover accounts receivable Asset Turnover Net sales/Average total assets Net income/Average total stockholders' equity Total liabilities/Total stockholders equity Net income/Net sales Return on Equity (ROE) Debt to equity Return on Sales (ROS) (also known as Net Margin Current Assets/Current Liabilities Cost of goods sold/Average inventory Quick assets/Current Current Ratio Inventory Turnover Quick Ratio liabilities Dividend Yield Dividends per share/Market price per share Net earnings available for common stock/Number of outstanding common shares Net income/Average total Earnings per Share (EPS) Return on Investment (ROI) assets Price Earnings Ratio (P/E) Market price per share/Earnings per share…arrow_forward
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