One limitation of vertical analysis is that it cannot be used to compare two companies that are significantly different in size.

The sale of used equipment at book value for cash will increase earnings per share.

An increase in the number of shares of common stock outstanding will decrease a company's price-earnings ratio if the market price per shares remains unchanged.

If a company's acid test ratio increases, its current ratio will also increase.

Short term borrowing is not a source of working capital

Attention Directing is one of the many basic objectives of financial statement analysis.

Since financial statements are summary of historical data, it cannot be used to predict the future for management decision making purposes.

the ratio that shows the margin by which the firm's operating cash flows cover its financial requirements is the cash flow coverage ratio.

Companies with relatively high rates of return on equity generally sell at higher multiples of book value than those with low returns

If the firms liquidity, asset management, debt management and profitability ratios are all good, then, its market value ratios will be high and its stock price is expected to be as high it can be.

Short term debt frequency less expensive because it provides the borrower more security

The hedging principle involves the matching of the cash flow of an asset with the maturity of a financing source

Holding all other variables constant, as accounts receivable increases, the cash conversion cycle decreases.

A firm that continually finances part of its permanent asset needs from short term financing is following a less risky approach

Sources of financing repaid in six months to one year are usually categorized as long term

Major sources of secured credit include commercial banks, finance companies, and factors

Inventory loans are considered an unsecured source of financing

Minimizing working capital is accomplished by slowing down the cash conversion cycle

One factor that determines the amount of cash needed to satisfy a firm's transactions requirements is the firm's industry

The speculative motive for holding cash relates to the maintenance of balances to be used to satisfy possible, and indefinite, needs.

The money market is created by a financial relationship between the suppliers and demanders of short-term debt securities maturing in one year or less

The primary economic principle used in managerial finance is marginal cost–benefit analysis, the principle that financial decisions should be made, and actions taken only when the added costs exceed the added benefits.

Financial managers actively manage the financial affairs of many types of business—financial and non-financial, private and public, for-profit and not-for-profit.

The issuance of commercial paper is in the area of investment decision.

Finance  is  concerned  with  the  process  institutions,  markets,  and  instruments  involved  in  the transfer of money among and between individuals, businesses and government.

Managerial  finance  is  concerned  with  design  and  delivery  of  advice  and  financial  products  to individuals, business, and government.

The purchase of a new plant or properties for an expansion program is in the area of financing

decision.

The  corporate  controller  is  the  officer  responsible  for  the  firm’s  accounting  activities,  such  as corporate accounting, tax management, financial accounting, and cost accounting.

One advantage of forming a corporation is that you have limited liability.