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 refers to a company's ability to make interest payments and repay debt at maturity.

Answer: B 
 Leverage refers to the amount of debt a company has in relation to its equity.

Answer: C 
 Times interest earned is a ratio that measures a company's ability to handle its interest payments.

Answer: D 
 Horizontal analysis compares a company's financial data over time.

Answer: E 
 Vertical analysis compares a company's financial data to a base amount.

Answer: F 
 Common-sized financial statements express each item as a percentage of a base amount, making it easier to compare companies of different sizes.

Answer: G 
 Current position analysis is a type of financial analysis that focuses on a company's short-term liquidity.

Answer: H 
 Profitability analysis is a type of financial analysis that focuses on a company's ability to generate profits.

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