Financial Ratios

question 10

Multiple Choice

Financial ratios:

• A) help financial statement users to evaluate the financial characteristics of companies by putting the large dollar amounts reported in financial statements into relative terms for comparison purposes.
• B) provide for a more meaningful analysis when the trends of financial ratios for a company are compared to the industry average trends over a period of time.
• C) are required reporting disclosures in the notes to the consolidated financial statements of U.S. companies that are regulated by the SEC.
• D)All of the above statements are true.
• E) A and B are true, but C is not true.

Distinguish between capital, money, primary, and secondary markets.

Recognize the role of financial markets and intermediaries in the economy.

Identify the economic sectors of industrialized economies and their components.

Conceptualize the principle of maturity matching in financing projects.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, often expressed as an annual percentage of the principal.

Interest Payable

The amount of interest expense that has accrued but has not yet been paid by the company.

Accounts Payable

An accounting entry representing an entity's obligation to pay off a short-term debt to its creditors or suppliers.

Notes Payable

A liability on a balance sheet representing promissory notes that a company must pay in the future.