6.11: Multiple Choice
- Page ID
- 94621
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identifying trends over time
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benchmarking against other firms
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complying with SEC (Securities and Exchange Commission) regulations
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setting budget expectations
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It makes the figures easier to calculate.
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It masks actual financial data so the competition can’t see it.
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It saves time.
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It makes comparisons to companies of varying sizes possible.
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past performance
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inflation
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Generally Accepted Accounting Principles
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benchmark data
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net credit sales / average accounts receivable
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total sales / average accounts receivable
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net credit sales / beginning accounts receivable
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net cash sales / ending accounts receivable
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net income / interest expense
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earnings before interest and taxes / interest expense
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interest expense / earnings before interest and taxes
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earnings before interest and taxes – interest expense
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(net income + preferred dividends) / weighted average common shares outstanding
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net income / weighted average common shares outstanding
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(net income – preferred dividends) / weighted average common shares outstanding
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(net income – preferred dividends) / treasury shares outstanding
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Consistent improvement in earnings per share year after year is an indication of continuous improvement in the company’s earning power.
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Consistent improvement in earnings per share year after year is an indication of continuous decline in the company’s earning power.
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Consistent improvement in earnings per share year after year is an indication of fraud within the company.
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Consistent improvement in earnings per share year after year is an indication that the company will never suffer a year of net loss rather than net income.
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net sales / net income
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cost of goods sold / net sales
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sales / cost of goods sold
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net income / net sales