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Match Each of the Following Terms with the Appropriate Definitions

Question 128

Matching

Match each of the following terms with the appropriate definitions.

Premises:

Responses:

Vertical analysis

A company's ability to cover long-term obligations.

Common-size financial statement

Examination of financial data across time.

Financial statement analysis

A statement with data for two or more successive accounting periods placed in side-by-side columns, often with changes shown in dollar amounts and percents.

Solvency

A company's ability to generate positive market expectations.

Horizontal analysis

A company's ability to provide financial rewards sufficient to attract and retain capital.

Equity ratio

The application of analytical tools to general-purpose financial statements and related data for making business decisions.

Comparative financial statement

The availability of resources to meet short-term obligations and to efficiently generate revenues.

Liquidity and efficiency

A statement where each amount is expressed as a percent of a base amount to reveal the relative importance of each financial statement item.

Profitability

The portion of total assets provided by equity, computed as total equity divided by total assets.

Market prospects

The comparison of a company's financial condition and performance to a base amount.