Wilson Wong Received an Inheritance from His Grandfather

question 144

Essay

Wilson Wong received an inheritance from his grandfather.Wilson wants to invest the money in stocks.He is interested in long-term investments in companies with solid financial performance.Explain to Wilson the four major categories of financial ratios and how they are used to help investors analyze the performance of companies.

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Definitions:

Withdrawals

A subdivision of owner’s equity that records money or other assets an owner withdraws from a business for personal use.

Vouchers Payable

Short-term obligations or liabilities that represent amounts owed to suppliers or creditors, which are supported by documentary evidence of the transaction.

Accounts Payable

Liabilities or amounts owed to creditors for goods and services that have been received but not yet paid for by the business.

Gross Method

An accounting method for recording purchases at the full invoice price without deducting any cash discounts at the time of purchase.