Match each definition that follows with the term (a-h) it defines.
-A company's ability to make interest payments and repay debt at maturity
A)Solvency
B)Leverage
C)Times interest earned
D)Horizontal analysis
E)Vertical analysis
F)Common-sized financial statements
G)Current position analysis
H)Profitability analysis

Question

Quizplus · Accepted Answer

Solvency is the ability of a company to make interest payments and repay debt at maturity.

Answer: B 
 Leverage refers to a company's use of debt to finance its operations and investments.

Answer: C 
 The times interest earned ratio measures a company's ability to meet its interest payments with its earnings.

Answer: D 
 Horizontal analysis is a financial analysis technique that compares a company's financial performance over time.

Answer: E 
 Vertical analysis is a financial analysis technique that compares the components of a company's financial statements as a percentage of a key metric, such as revenue.

Answer: F 
 Common-sized financial statements are financial statements that present each line item as a percentage of a key metric, such as revenue.

Answer: G 
 Current position analysis is a financial analysis technique that assesses a company's liquidity, working capital, and overall financial health in the short term.

Answer: H 
 Profitability analysis is a financial analysis technique that assesses a company's ability to generate profits relative to its expenses and other costs.

Match Each Definition That Follows with the Term (A-H) It