SAT. S 115. Accounting terminology Listedbelow are eight technical accounting te
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SAT. S 115. Accounting terminology Listedbelow are eight technical accounting terms introduced in this chapter: Current ratio Return on assets Priceleamings ratio Quick ratio Market shre Eanings per share Debt ratioWorking capital Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the term described, or answer "None" if the statement does not correctly describe any 9 / Debt Ratio: The percentage of total assets financed by creditors. of the terms. Return on assets: A measure of the effectiveness with which management u regardless of how those resources are financed. Market Share: A company's percentage share of total dollar sales within its industry. Working Capital: Current assets less current liabilities. P/E Ratio: A measure reflecting investors expectations of future profitability Quick Ratio: A measure of short-term solvency often used when a company has large inventories that cannot be quickly converted into cash. EPS: A ratio that helps individual stockholders relate the net income of a large corporation to their equity investment CA Cum. Ratios Tht ladbExplanation / Answer
1)Debt ratio:The percentage of total asset financed by creditor:
debt ratio: total liability / total asset :so above statement describe the debt ratio
2)return on asset: A measure of effectiveness with which management utiles a company resources regardless of how those resourses are financed.
ROA: Net income/ Average total asset. The ROA figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. So statement describe ROA
3)Market share: A company percentage share of total dollar sales within its industry.
So statement describe Market share.
4)working capital: current asset less current liabilty. So statement Describe the working capital
5)PE ratio: a measure reflecting investor espectation of future probability.
The price-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings. So the statement may not describe PE ratio
6)QUICK RATIO: A measure of short term solvency often used when a company has large inventories that cannot be quickly converted into cash.
Quick ratio= Liquid asset / liablity It may describe the term.
The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not turn to cash quickly. THe ststement may be correct.
7) EPS: A ratio that helps individual stockholder related the net income of a large corporation to their equity investment: Statement is correct
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