BAT 4M1 CPT Chapter 17 Notes
|
|
- Ashlee Jennings
- 6 years ago
- Views:
Transcription
1 BAT 4M1 CPT Chapter 17 Notes Basics of Financial Statement Analysis Financial statement analysis involves evaluating a company s liquidity, solvency, and profitability Objective: to give capital providers information useful for decision making Short term creditors are mostly interested in liquidity Long term creditor are mostly interested in solvency (company s ability to survive over a long period of time Comparative Analysis Users of financial information make comparisons in order to evaluate a company s performance, and to use this information to help determine future expectations Every item in a financial statement has significance however, has very little value on its own amounts are used to see if there was an increase or decrease from previous years Comparisons can be made on different bases; 1. Intra company Basis: compares an item or financial relationship inside or within a company useful for identifying changes in financial relationships and discovering trends 2. Inter company Basis: compares an item or financial relationship of one company with other companies useful for understanding a company s competitive position Tools of Analysis Various tools are used to evaluate the significance of financial data for decision making; 1. Horizontal Analysis: compares data such as line items in a company s financial statements by expressing them as percentage increases and decreases over 2 or more years (periods) Helps identify changes and trends over time Used mainly in intracompany comparisons (within a company) 2. Vertical Analysis: compares data by expressing line items in a company s financial statement as a percentage of a total amount within the same financial statement and year (period) Focuses on the relationships between items on the same financial statement Used in both intracompany and intercompany comparisons It is useful to compare data both within a company (intracompany) and between 2 or more companies (intercompany) Vertical percentages can also be compared across time
2 3. Ratio Analysis: expresses the relationship between selected items of financial statement data within the same year (period) Helps us understand the relationship among selected items presented in one or more financial statements Used in both intracompany and intercompany comparisons Horizontal Analysis also known as a trend analysis Horizontal Analysis : a technique used to compare a series of data Ex. items in a company s financial statements over a period of time Views financial statement from left to right or vice versa Purpose is to determine whether the percentage over time has increased or decreased Horizontal Percentage of Base Period Amount : expresses revenue as a percentage of the base year amount Horizontal Percentage of Base Period Amount= Analysis Period Amount/Base Period Amoun t Horizontal Percentage Change For Period : measures the percentage change between two periods of time Horizontal Percentage Change For Period=(Analysis Period Amount Prior Period Amount)/Prior Period Amount Balance Sheet In a horizontal analysis, the amount column of the increase/decrease is additive, unlike the percentage column which is not. Any losses on fair value adjustments are on the income statement and not the statement of comprehensive income. Changes in current assets and current liabilities usually move in the same direction, meaning both will either increase or decrease, which is better than one increasing/decreasing more than the other. Income Statement In a horizontal analysis, it shows the dollar amounts and percentage changes during the period. If an item has a small value in a base or prior year and and a large value in the next year, the percentage change could be disproportionately large and may not be meaningful. If a negative amount shows in the base or prior year and there is a positive amount the following year (vice versa), no percentage change can be calculate. If an item as no value in a base or prior year and a value in the next year, no percentage change can be calculated. Vertical Analysis also known as a common size analysis Vertical Analysis: a technique for comparing an amount in a company's financial statements with a total (base) amount within the same financial statement.
3 Vertical analysis simply means that we view data from up and down in the same time period Horizontal looks at data longer than a year whereas vertical data is only for within one year Vertical percentage of base amount: calculated by dividing the financial statement amount under analysis by the relevant total or base amount for that particular statement Vertical percentage of Base Amount = Analysis Amount/ Base Amount The base amount commonly used for the balance sheet is total assets, the base amount for the income statement is revenues for a service company and net sales for a merchandising company. All base amounts in vertical analysis are equal to 100%. Balance Sheet Intracompany Comparison For the balance sheet the base amount being used is total assets. Due to the accounting equation total assets can be used for both assets and liabilities. Vertical analysis shows the size of each item for the year prior and the current year. Vertical analysis can be used to compare individual assets, liabilities and shareholders equity items between years. Intercompany Comparison The vertical analysis can also be used to compare companies. This becomes useful when comparing companies of different sizes. Income Statement When doing a vertical analysis on an income statement, the base amount is net sales. This can also be performed on the statement of comprehensive income, statement of changes in shareholders equity and cash flow statement. Vertical analysis can also be applied to intercompany comparisons of the income statement. Liquidity Ratios Liquidity Ratios : measure the company s short term ability to pay its maturing obligations and to meet unexpected needs for cash Short Term Creditors Include: Suppliers and bankers Interested in assessing liquidity Liquidity Ratios Include: Current Ratio Acid Test Ratio Receivables Turnover Collection Period Inventory Turnover
4 Days sales in inventory Operating cycle Current Ratio : measure of a company s liquidity and short term debt paying ability Desired Result: Higher Current Ratio = Current Assets/Current Liabilities Acid Test Ratio : excludes that assets are less than liquid (ex. inventory) which takes more time to be converted to cash Desired Result : Higher Acid Test Ratio = (Cash+Short term Investments+Receivables)/Current Liabilities Receivables Turnover : measures the number of times that receivables are collected during the period Assess the liquidity of the receivables Desired Result: Higher Receivables Turnover = (Net Credit Sales Cash Sales)/Average Gross Accounts Receivables Collection Period : variation of receivables turnover is to convert it into a collection period (in days) Desired Results: Lower Collection Period = Days in Year/Receivables Turnover Inventory Turnover : measures average number of times inventory is sold during the period Measures liquidity of inventory Desired Results : Higher Inventory Turnover = Cost of Goods Sold/Average Inventory Days Sales In Inventory : variant of inventory turnover is the days sales in inventory Desired Results: Lower Days Sales In Inventory = Days in Year/Inventory Turnover Operating Cycle : measures average time it takes to purchase inventory, sell on account and collect the cash from customers Desired Results: Lower Operating Cycle = Days Sales in Inventory + Collection Period
5 Summary of Liquid Ratios It is better to take fewer days to collect receivables and have fewer days of inventory on hand. A current ratio can be high at times because of higher balances of receivables and inventory included in current assets due to slow moving inventory/uncollectible receivables. Never conclude as assessment of liquidity with just one ratio, the current ratio should always be interpreted with the acid test, receivables turnover and inventory turnover ratio, and the acid test ratio should always be interpreted with the receivables as well as the receivables turnover ratio. Solvency Ratios Solvency Ratios : measures the company s ability to last over a long period of time Long Term Creditors Interested in company s long term solvency Ability to pay interest as it comes due and to repa the face value of debt at maturity Solvency Ratios Include: Debt to total assets Interest coverage Free cash flow Debt to Total Assets : measures percentage of total assets provided by creditors The higher the percentage of total debt to total assets, the greater the risk that the company may be unable to meet its maturing obligations The lower the debt to total assets, the more net assets there are to repay creditors if the company becomes insolvent Desired Results : Lower Less debt reduces dependence on debt financing, flexibility for future financing alternatives Debt to Total Assets = Total Liabilities/Total Assets Interest Coverage : an indication of whether the company is able to make its interest payments when due Desired Results : Higher Interest Coverage = (Profit + Interest Expense +Income)/Interest Expense Free Cash Flow : an indication of how solvent a company is as well as its ability to expand its operations, repay debt or pay dividends Desired Results : Higher Free Cash Flow = Cash Used by Operating Expenses Cash Provided by Investing Activities
6 Summary of Solvency Ratios You should interpret the debt to total assets and interest coverage ratio together. If a company has a high debt to total assets ratio as well as a high interest coverage ratio it means it is able to handle a high level of debt. If a company has a low debt to total assets ratio as well as a low interest coverage ratio, it means it has difficulty paying interest for even a small amount of debt. Profitability Ratios Profitability Ratio: measures a company s operating success for a specific period of time Profit, or lack of, affects a company s ability to obtain debt and equity financing, its liquidity position and growth Interested: Creditors and Investors Gross Profit Margin: indicates the relationship between net sales and cost of goods sold Too high lose sales if pricing is not competitive Too low may not have enough to cover expenses Gross Profit Margin = Gross Profit/Net Sales Profit Margin: measures the percentage of each dollar of sales that results in profit Profit Margin = Profit/Net Sales Asset Turnover: measures how efficiently a company uses its assets to generate sales Asset Turnover = Net Sales/Average Total Assets Return on Assets: measure of profitability on assets Return on Assets = Profit/Average Total Assets Return on Equity: measures profitability of shareholders investments Return on Equity = Profit/Average Shareholders Equity
7 Earnings per Share (EPS): measure of profit earned on each common share Reducing profit to a per share basis gives a useful measure of profitability EPS = (Profit Preferred Dividends)/Weighted Average Number of Common Shares Price Earnings (PE) Ratio: measures the relationship between market price per share and earnings per share PE= Market Price per Share/Earnings per Share Payout Ratio: measures percentage of profit distributed as cash dividends Payout Ratio = Cash Dividends/Profit Summary of Profitability Ratios The higher the price earnings ratio, the more investors favor that company and have high expectations of future profitability. Investors who are interested in purchasing a company s shares for income purposes are interested in companies with a high payout ratio. Investors who are interested in purchasing a company s share for growth purposes are interested in a low payout ratio. A company s solvency doesn t just require satisfactory liquidity but it also affected by its profitability Alternative Accounting Policies Companies may use different inventory cost determination methods or different depreciation methods depending on the pattern of the revenues their assets produce, and using these different methods can result in differing financial positions and performance and that will reduce comparability. Although depreciation expense and the carrying amount of property, plant and equipment may be different in one or more periods because of the choice of depreciation methods, in total, over the life of the assets, there is no difference. Intercompany comparability may also be hindered by differing accounting policy options available for private companies. Intracompany comparability can be affected by the use of different accounting policies over different periods of time. Comprehensive Income Comprehensive income is the sum of net income and other items that must bypass the income statement because they have not been realized, including items like an unrealized holding gain or loss from available for sale securities and foreign currency translation gains or losses. In some cases where other comprehensive income is significant and depending on the source of the income, some analysts will adjust profitability ratios in order to incorporate the effect of total
8 comprehensive income. ASPE does not report comprehensive income, so this limitation would apply only to the public and private companies. Quality of Information A company that has high quality index includes full and transparent information that will not confuse or mislead users of the financial statements. A strong corporate governance process, including an active board of directors and audit committee, is essential to ensuring the quality of information. Economic Factors Economic measures such as the rate of interest, unemployment and changes in demand and supply can have a significant impact on a company s performance. When losses result in negative numbers, it is difficult to calculate percentages and ratios, much less interpret them and that is when vertical analysis becomes useful. If a company has losses, they must be assessed based on the factors driving the loss in the current period. Less attention should be paid to comparing the losses with results from prior periods.
9
Financial Statement Analysis
14-1 Chapter 14 Financial Statement Analysis 14-2 Learning Objectives After studying this chapter, you should be able to: 1. Discuss the need for comparative analysis. 2. Identify the tools of financial
More informationAnalysis and Interpretation of Financial Statements
Chapter 23 Analysis and Interpretation of Financial Statements o Prepare comparative financial statements using horizontal analysis o Prepare comparative financial statements using vertical analysis o
More information2/2/2009. Financial statement EARNING POWER AND IRREGULAR ITEMS. EARNING POWER AND IRREGULAR ITEMS continued. Chapter 14
Chapter 14 Financial statement analysis PowerPoint presentation by Anne Abraham University of Wollongong 2009 John Wiley & Sons Australia, Ltd EARNING POWER AND IRREGULAR ITEMS Earning power refers to
More informationChapter 17 Notes - Part 1
Basics of Financial Statement Analysis Chapter 17 Notes - Part 1 Involves evaluating a company and its liquidity, solvency, and profitability All extremely important for investors and creditors Comparative
More informationAccounting Building Business Skills. Learning Objectives: Learning Objectives: Paul D. Kimmel. Chapter Eleven: Financial Statement Analysis
Accounting Building Business Skills Paul D. Kimmel Chapter Eleven: Financial Statement Analysis PowerPoint presentation by Kate Wynn-Williams University of Otago, Dunedin 2003 John Wiley & Sons Australia,
More informationHow Well Am I Doing? Financial Statement Analysis
How Well Am I Doing? Financial Statement Analysis Chapter 16 McGraw-Hill/Irwin Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Limitations of Financial Statement Analysis Differences
More informationcondition & operating results in a condensed form. Financial statements are used as a
2.1 FINANCIAL ANALYSIS Financial statements are formal records of the financial activities of a business, person or other entity and provide an overview of a business or person s financial condition in
More informationLearning Objective. LO1 Analyze an income statement using vertical analysis Cengage Learning. All Rights Reserved.
Learning Objective LO1 Analyze an income statement using vertical analysis. Lesson 17-1 Vertical Analysis Ratios LO1 Vertical analysis ratios measure the relationship between one financial statement item
More informationRatio Analysis. Assets = Liabilities + Shareholder s Equity
Ratio Analysis The purpose of a financial statement is to disclose information about the financial position of an entity to interested parties. By reporting the finances, shareholders are able to make
More informationWORKING CAPITAL ANALYSIS OF SELECT CEMENT COMPANIES IN INDIA
CHAPTER - IV WORKING CAPITAL ANALYSIS OF SELECT CEMENT COMPANIES IN INDIA CHAPTER IV WORKING CAPITAL ANALYSIS OF SELECT CEMENT COMPANIES IN INDIA In this chapter an attempt has been made to analyse the
More informationEXCEL PROFESSIONAL INSTITUTE FINANCIAL STATEMENT INTERPRETATION
EXCEL PROFESSIONAL INSTITUTE FINANCIAL STATEMENT INTERPRETATION Elikem Vulley Most of the marks in an examination question will be available for sensible, well explained and accurate comments on the key
More informationWeek 4 and Week 5 Handout Financial Statement Analysis
Week 4 and Week 5 Handout Financial Statement Analysis Introduction After understanding the basic financial statements, one may be interested in analysing the financial statements to understand the performance
More informationFAQ: Financial Ratio Analysis
Question 1: What is horizontal analysis of financial statement data? Answer 1: Horizontal analysis is a method of financial ratio analysis. Horizontal analysis is comparing each item on the financial statements
More informationCHAPTER Time Value of Money
CHAPTER 6 6.1 Time Value of Money Money has time value. A rupee is less valuable in the future than it is today. Time value of money could be studied under the following heads: Future value of a single
More informationBAT 4M1. June 6, 2016
Corporate Analysis 2015 BAT 4M1 Corporate Analysis ISU June 6, 2016 1 TABLE OF CONTENTS Introduction... Page 3 PART 1 - COMPANY REVIEW... Page 4-5 PART 2 - RATIO ANALYSIS... Page 6-12 Shareholders Short-term
More informationChapter 19. Financial Statement Analysis. Learning Objectives. The Annual Report Usually Contains...
PowerPoint to accompany Chapter 19 Financial Statement Analysis Learning Objectives 1. Perform a horizontal analysis of comparative financial statements 2. Perform a vertical analysis of financial statements
More informationEvaluating the Ability To Pay Current Liabilities
Kelsey McCarty Amazon Financial Analysis Paper The purpose of this paper will to break down a company s financial statements using various ratios to determine if Amazon is a profitable and efficient company.
More informationCHAPTER 18. Financial Statement Analysis. Brief Exercises Exercises 4, 5, 6, 7 3, 4, 5 2, 3, , 9, 10, 11, 12, 13, 14, 15, 16
CHAPTER 18 Financial Statement Analysis ASSIGNMENT CLASSIFICATION TABLE Study Objectives 1. Explain and apply horizontal analysis. Questions 1, 2, 3, 4, 5 Brief Exercises Exercises Problems Set A Problems
More informationUnderstanding Financial Statements. Elizabeth Rankin
Understanding Financial Statements Elizabeth Rankin Overview Accounting Concepts Principles Financial Statements Evaluating Performance Horizontal Analysis Vertical Analysis Ratio Analysis Entity Concept
More informationn Financial Statement Analysis n Dollar and Percentage Changes n Common Sized Statements n Ratio Analysis McGraw-Hill /Irwin McGraw-Hill /Irwin
14-1 Today s Agenda Management Accounting Lecture 3 (Chapter 14) Financial Statement Analysis Bangor University Transfer Abroad Programme n Financial Statement Analysis n Dollar and Percentage Changes
More informationCA. Sonali Jagath Prasad ACA, ACMA, CGMA, B. Com.
MANAGEMENT OF FINANCIAL RESOURCES AND PERFORMANCE SESSIONS 5 & 6 FINANCIAL DATA, PERFORMANCE ANALYSIS & MANAGEMENT AND DECISION MAKING June 10 to 24, 2013 CA. Sonali Jagath Prasad ACA, ACMA, CGMA, B. Com.
More informationA Manager's Guide to Financial Analysis
A Manager's Guide to Financial Analysis A Manager's Guide to Financial Analysis Fifth Edition Steven D. Grossman Contents About This Course How to Take This Course Introduction ix xi xiii 1 Financial
More informationAll amounts in 000's of Canadian dollars, except common shares issued (a) (1) (a) (2)
Shoppers Suggested Solution (a) (1) and (2) Shoppers Drug Mart All amounts in 000's of Canadian dollars, except common shares issued (a) (1) (a) (2) Horizontal Analysis Vertical Analysis Comparison 2007-2008
More informationAccounting for managers
Accounting for managers CALICUT UNIVERSITY 5 RD SEMESTER B.COM SHORT QUESTIONS/ 2 MARKS QUESTIONS 1. What is Acid test Ratio? This is the ratio of liquid assets to current/ liquid liabilities. It shows
More informationWeek 14, Chap14 Accounting 1A, Financial Accounting
Week 14, Chap14 Accounting 1A, Financial Accounting Analyzing Financial Statements Instructor: Michael Booth Understanding The Business Return on an equity security investment Dividends Increase in share
More informationLESSON Trend Analysis and Component Percentages. CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning
Trend Analysis and Component Percentages Trend Analysis and Component Percentage 2 Financial statements report the financial condition and progress of a business for a fiscal period. Accounting concepts
More informationGleim CMA Review Updates to Part Edition, 1st Printing March 2015
Page 1 of 5 Gleim CMA Review Updates to Part 2 2015 Edition, 1st Printing March 2015 NOTE: Text that should be deleted is displayed with a line through it. New text is shown with a blue background. Study
More informationFINANCIAL STATEMENTS ANALYSIS - AN INTRODUCTION
Financial Statements Analysis - An Introduction 27 FINANCIAL STATEMENTS ANALYSIS - AN INTRODUCTION You have already learnt about the preparation of financial statements i.e. Balance Sheet and Trading and
More information16 Statement of Cash Flows
Chapter 16 Statement of Cash Flows Learning Objectives: Learn about the purpose of the statement of cash flows Learn about the various sections of the statement of cash flows Learn how to prepare a statement
More informationSample Test: Fundamentals of Finance
Sample Test: Fundamentals of Finance Assessment is for sample purposes to test the knowledge of fundamental of finance for Credit challenge participants and shouldn t be used for any other purpose apart
More informationAccounting)Exam)Notes!
Accounting)Exam)Notes! Week 1 The role of accounting in business Adjusting processes can be created Accounting period - a measurement period. 12 months. Listed companies can be 6 months - even quarterly.
More information10 Key Financial & Operating Ratios
Adapted from United Equipment Dealers Assn. s Cost of Doing Business Study: 10 Key Financial & Operating Ratios Financial and operating records, carefully maintained, provide dealers with the only sound
More informationWeek-2 FINC Analysis of Financial Statements. Balance Sheets
Dr. Ahmed FINC 5000 Week-2 Name Analysis of Financial Statements Balance Sheets Assets 2003 2004 2005e Cash $ 9,000 $ 7,282 $ 14,000 Short-Term Investments. 48,600 20,000 71,632 Accounts Receivable 351,200
More informationSample Text: Fundamentals of Finance
Sample Text: Fundamentals of Finance Assessment is for sample purposes to test the knowledge of fundamental of finance for Credit challenge participants and shouldn t be used for any other purpose apart
More informationUNIT 6 FINANCIAL STATEMENTS: ANALYSIS AND INTERPRETATION MODULE - 2
UNIT 6 FINANCIAL STATEMENTS: ANALYSIS AND INTERPRETATION MODULE - 2 UNIT 6 FINANCIAL STATEMENTS: ANALYSIS AND INTERPRETATION Financial Statements: Structure 6.0 Introduction 6.1 Unit Objectives 6.2 Relationship
More informationCranswick Plc is a food supplier company listed on the London Stock Exchange. The following
Financial Ratio Analysis Cranswick Plc is a food supplier company listed on the London Stock Exchange. The following represent ratios for the company for the year ended 31 st March 2012. Investors ratios
More informationWEEK 10 Analysis of Financial Statements
WEEK 10 Analysis of Financial Statements Learning Objectives 1. Organize a systematic financial statements analysis using common-size financial statements and ratio analysis. 2. Recognize the potential
More informationLIQUIDITY MANAGEMENT Presentation by: CPA Richard Kamami Secretary, PSB,Murang a PSB 23rd November 2017
LIQUIDITY MANAGEMENT Presentation by: CPA Richard Kamami Secretary, PSB,Murang a PSB 23rd November 2017 Uphold public interest Outline Definitions Assessment of Liquidity Criticism Liquidity Management
More informationnot to be republished NCERT You have learnt about the financial statements Analysis of Financial Statements 4
Analysis of Financial Statements 4 LEARNING OBJECTIVES After studying this chapter, you will be able to : explain the nature and significance of financial analysis; identify the objectives of financial
More informationExecutive Dashboard. What We ll Cover. Melissa Wood Consultant
Executive Dashboard Melissa Wood Consultant What We ll Cover 1. What kind of information can I find in the Executive Dashboard? 2. Set Up and Save Criteria 3. Using Graphs for More Detail 4. Analyze Financial
More informationFinancial Analysis. Instructor: Michael Booth Cabrillo College
Financial Analysis Instructor: Michael Booth Cabrillo College Factors in Communicating Useful Information The primary objective of accounting is to provide information useful for decision making. To provide
More informationRATIO ANALYSIS. The preceding chapters concentrated on developing a general but solid understanding
C H A P T E R 4 RATIO ANALYSIS I N T R O D U C T I O N The preceding chapters concentrated on developing a general but solid understanding of accounting principles and concepts and their applications to
More informationFINANCIAL RATIOS. LIQUIDITY RATIOS (and Working Capital) You want current and quick ratios to be > 1. Current Liabilities SAMPLE BALANCE SHEET ASSETS
FINANCIAL RATIOS ROUND ALL ANSWERS TO TWO DECIMALS UNLESS REQUESTED OTHERWISE IN THE PROBLEM LIQUIDITY RATIOS (and Working Capital) You want current and quick ratios to be > 1 Current Ratio Quick Ratio
More informationFINANCIAL PERFORMANCE ANALYSIS OF BEXIMCO PHARMACEUTICALS LTD. AND SQUARE PHARMACEUTICALS LTD. Submitted to. M. Nurul Amin.
FINANCIAL PERFORMANCE ANALYSIS OF BEXIMCO PHARMACEUTICALS LTD. AND SQUARE PHARMACEUTICALS LTD. Submitted to M. Nurul Amin Submitted by Date-31 st July, 2010 North South University Financial Performance
More informationProfessional Designation Ratios: Formulas & Definitions Used in Credit Risk Assessment
Professional Designation Ratios: Formulas & Definitions Used in Credit Risk Assessment Profitability Ratios Measure management's ability to control expenses and to earn a return on the resources committed
More informationTable 1: Reconciliation of Reported Earnings Per Share from Continuing Operations
The TJX Companies, Inc. Financial Reconciliations Explanation of Non GAAP Financial Measures The Company reports its financial results in accordance with generally accepted accounting principles in the
More informationACCOUNTING FOR NON- ACCOUNTANTS UNDERSTANDING THE BASICS OF ACCOUNTING
ACCOUNTING FOR NON- ACCOUNTANTS UNDERSTANDING THE BASICS OF ACCOUNTING LEARNING OBJECTIVE To guide and assist you in your decision making processes, To allow you to participate actively in the financial
More informationFINANCIAL ANALYSIS TOOLS: DESCRIPTION CHAPTER 7 FINANCIAL ANALYSIS TECHNIQUES GRAPHICS: EXAMPLE GRAPHICS: EXAMPLE
Presenter s name Presenter s title dd Month yyyy CHAPTER 7 FINANCIAL ANALYSIS TECHNIQUES FINANCIAL ANALYSIS TOOLS: DESCRIPTION Graphics Regression Common-Size Analysis Financial Ratio Analysis Copyright
More informationCBF Exam Review. Income Statement. Disclosure of Items. Financial Statements Part 2. Tom Shimko, CCE
CBF Exam Review Financial Statements Part 2 Tom Shimko, CCE 1 Income Statement Represents estimates for revenues and costs using accrual accounting. Accrual and cash accounting differ Net income not equal
More informationPerformance Indicators for 6 years
Performance Indicators for 6 years FINANCIAL POSITION Balance sheet (Rupees in Thousand) Other noncurrent assets Total assets 2,084,856 6,544 2,436,65 2,040,33 11,386 2,257,568 4,417,23 1,803,2 101,268
More informationCHAPTER-3 OVERVIEW OF FINANCIAL STATEMENT ANALYSIS
CHAPTER-3 OVERVIEW OF FINANCIAL STATEMENT ANALYSIS INDEX SR.NO NAME OF TOPIC 3.1 INTRODUCTION 3.2 MEANING AND CONCEPT OF FINANCIAL ANALYSIS 3.3 DEFINITIONS 3.4 OBJECTIVES AND IMPORTANCE OF FINANCIAL STATEMENT
More informationFINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT Financial Statement Analysis The process of determining financial strengths and weaknesses of a firm by establishing strategic relationship between the items of the balance sheet,
More informationCHAPTER-5 DATA ANALYSIS PART-3 LIQUIDITY AND SOLVENCY
CHAPTER-5 DATA ANALYSIS PART-3 LIQUIDITY AND SOLVENCY 190 CHAPTER 5 DATA ANALYSIS PART-3 LIQUIDITY & SOLVENCY 5.1 INTRODUCTION:... 192 5.2 LIQUIDITY & SOLVENCY RATIOS:... 194 5.2.1 CURRENT RATIO:... 194
More informationUNIT 3 RATIO ANALYSIS
Understanding and Analysis of Financial Statements UNIT 3 RATIO ANALYSIS Structure Page Nos. 3.0 Introduction 52 3.1 Objectives 54 3.2 Categories of Ratios 54 3.2.1 Long-term Solvency Ratios 3.2.2 Liquidity
More informationSTUDY UNIT TWO FINANCIAL PERFORMANCE METRICS FINANCIAL RATIOS
STUDY UNIT TWO FINANCIAL PERFORMANCE METRICS FINANCIAL RATIOS 1 2.1 Liquidity Ratios.......................................................... 2 2.2 Leverage and Solvency Ratios..............................................
More informationManagerial Accounting Prof. Dr. Varadraj Bapat Department of School of Management Indian Institute of Technology, Bombay. Lecture - 14 Ratio Analysis
Managerial Accounting Prof. Dr. Varadraj Bapat Department of School of Management Indian Institute of Technology, Bombay Lecture - 14 Ratio Analysis Dear students, in our last session we are started the
More information*Define and differentiate the accrual method and cash method of recording transactions.
Accounting 1 *Define and differentiate the terms accounting, auditing, and bookkeeping: --Accounting the process of recording, reporting and analyzing financial transactions. --Bookkeeping the process
More informationfinancial Analysis Annual Report
financial Analysis Annual Report 217 87 DuPont Analysis Increase in sales volume by 16% coupled with increasing price trend during the year resulted in higher sales and profits due to which EBIT margin
More informationCHAPTER 11 Accounting Ratios
CHAPTER 11 Accounting Ratios Accounting Ratio : It is arithmetical relationship between two accounting variables. Ratio Analysis : A tool used by individuals to conduct a quantitative analysis of infomation
More informationCHAPTER 4. ANALYSIS AND INTERPRETATION OF DATA Ratio Analysis - Meaning of Ratio (A) Return on Investment Ratios
CHAPTER 4 ANALYSIS AND INTERPRETATION OF DATA Ratio Analysis - Meaning of Ratio (A) Return on Investment Ratios - Concept of Return on Investment - Advantages of ROI - Limitations of ROI - Evaluation of
More informationPrinciples of Accounting, Tenth Edition
Principles of Accounting, Tenth Edition Answers to Stop, Review, and Apply Questions Chapter 14 The Corporate Income Statement and the Statement of Stockholders Equity 1-1. Quality of earnings refers to
More informationCHAPTER 20. Analysis and interpretation of financial statements CONTENTS
CHAPTER 20 Analysis and interpretation of financial statements CONTENTS 20.1 Horizontal and vertical analysis 20.2 Trend analysis 20.3 Effect of transactions on ratios 20.4 Ratio analysis 20.5 Ratio analysis
More informationAN INTRODUCTION TO ANALYSIS OF FINANCIAL STATEMENT
COURSE 6 Block 1 UNIT-1 AN INTRODUCTION TO ANALYSIS OF FINANCIAL STATEMENT Learning Objectives After reading this chapter, students should be able to: Meaning, definitions and features of financial statement
More informationANSWER SHEET EXAMINATION #2
ANSWER SHEET EXAMINATION #2 1) D 2) B 26) D 3) C 27) B 4) A 28) B 5) D 29) C 6) D 30) A 7) D 31) B 8) C 32) D 9) D 33) D 10) B 34) D 11) A 12) A 13) D 14) C 15) A 16) C 17) B 18) B 19) C 20) B 21) B 22)
More informationFinancial Ratio Analysis
2012 Financial Ratio Analysis Martin Zander 2 M. Zander Financial Ratio Analysis This book has been purchased online on: XinXii.com ebooks & documents from indie authors http://www.xinxii.com 3 Copyright,
More informationPerformance Management
UNIVERSITY OF PAVIA Performance Management Chiara Demartini mariachiara.demartini@unipv.it Master in International Business and Economics 1 Lectures and Test Lectures: Tuesday hr. 11-13 Room 15 Wednesday
More informationCBA Exam Review Part 3
CBA Exam Review Part 3 James A. McIntyre, CCE NACM 1 What Do Financial Statements Indicate? Liquidity Solvency Management Efficiency 2 Financial Statements Balance Sheet (Resource Sheet) Shows the financial
More informationPresentation for AAII. By Ian Gendler, Director of Research Value Line Inc.
Presentation for AAII By Ian Gendler, Director of Research Value Line Inc. Ian Gendler Ian Gendler supervises Value Line s Research Department. As part of this role, he oversees the creation of Value Line
More informationCourse # Analysis of the Corporate Annual Report
Course # 171021 Analysis of the Corporate Annual Report based on the electronic.pdf file(s): Analysis of the Corporate Annual Report by: Dr. Jae K. Shim, Ph.D., 2014, 56 pages 5 CPE Credit Hours Accounting
More informationPart 2: Financial Decision Making. Practice Questions
Part 2: Financial Decision Making Practice Questions CMA Exam Support Practice Questions Part II 1. A Statement of Financial Position prepared in accordance with U.S. GAAP allows investors to assess all
More informationANALYSIS OF THE FINANCIAL STATEMENTS
5 ANALYSIS OF THE FINANCIAL STATEMENTS CONTENTS PAGE STUDY OBJECTIVES 166 INTRODUCTION 167 METHODS OF STATEMENT ANALYSIS 167 A. ANALYSIS WITH THE AID OF FINANCIAL RATIOS 168 GROUPS OF FINANCIAL RATIOS
More informationWork4Me Accounting Simulations. Problem Seventeen
Work4Me Accounting Simulations 3 rd Web-Based Edition Problem Seventeen Financial Statement Analysis Page 1 Introduction You will be recording a variety of transactions involving assets, liabilities, and
More information9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle
9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no
More information6.1 Introduction. 6.2 Meaning of Ratio
6.1 Introduction Ratio analysis has emerged as the principal technique of analysis of financial statements. The system of analysis of financial statements by means of ratio was first made in 1919 be Alexander
More informationRole of Financial Manager. Assessing Financial Performance. Analysis of Financial Statements. To create value, the financial manager should:
Role of Financial Manager To create value, the financial manager should: 1. Make sound investment decisions. 2. Make sound financing decisions. Importance of Assessing Financial Performance Assessing Financial
More informationVI SEM BCOM STUDY MATERIAL MANAGEMENT ACCOUNTING. Prepared By SREEJA NAIR PADMA NANDANAN
NEW HORIZON COLLEGE MARATHALLI, BANGALORE (Affiliated to Bangalore University) A Recipient of Prestigious Rajyotsava State Award 2012 conferred by the Government of Karnataka VI SEM BCOM STUDY MATERIAL
More informationplanned selling activities o Review past expenses and adjust for current plans General and administrative expenses budget
Acct summary: Chapter 1 Private enterprise individuals own businesses that produce and sell services and/or goods for a profit o Service businesses perform services or activities that benefit individuals
More informationAGENDA: MANAGEMENT ACCOUNTING
14-1 Management Accounting Tutorial 8 (, chapter 13, 14, 1, 2, 3) Mid Module Review Bangor University Transfer Abroad Programme 1. Globalization. 2. Strategy. 3. Organizational structure. 4. Process management.
More informationDRIVING FINANCIAL PERFORMANCE
DRIVING FINANCIAL PERFORMANCE 26 th October 2017, IOD, Kolkata CA. PRAMOD JAIN FCA, FCS, FCMA, LL.B, MIMA, DISA BOD / DIRECTORS RESPONSIBILITIES To act with due diligence and care in the best interest
More informationIntroduction to Finance, Part 2: Cash Flow Statement & Financial Statement Analysis
1 Introduction to Finance, Part 2: Cash Flow Statement & Financial Statement Analysis CHRIS GASTON AND JENNIFER DEBOER Review & Roadmap Balance Sheet: a summary of a company s financial position at a specific
More informationa $33.17 $33.33 $33.50 $28.57
What is the book value per share for a company that has total stockholders' equity of $10,000,000, preferred stock of $50,000, and 300,000 common shares outstanding? a $33.17 $33.33 $33.50 $28.57 "'Your
More informationE1-E2 Accounting Standards And Ratio analysis
E1-E2 Accounting Standards And Ratio analysis For internal circulation of BSNLonly 1 WELCOME This is a presentation for the E1-E2 (Finance) Module for the Topic: Accounting standards and Ratio analysis
More informationBasic Financial Statement Analysis
Earn 2 CE credits This course was written for dentists, dental hygienists, and assistants. Basic Financial Statement Analysis (It s not as scary as you think!) A Peer-Reviewed Publication Written by Kathryn
More informationChapter 6. Data Analysis and Interpretation
Chapter 6 Data Analysis and Interpretation 6.1 Introduction. 6.2 Current Ratio. 6.3 Quick Ratio. 6.4 Debt Equity Ratio. 6.5 Interest Coverage Ratio. 6.6 Operating Profit Margin Ratio. 6.7 Net Profit Margin
More informationASSIGNMENT. Financial Management. TOPIC Ratio Analysis on Shinepukur Ceramics Limited ( ) Submitted to. S. M. Arifuzzaman Course Instructor
ASSIGNMENT Financial Management TOPIC Ratio Analysis on Shinepukur Ceramics Limited (2008-2010) Submitted to S. M. Arifuzzaman Course Instructor Financial Management Department of Accounting & Finance
More informationFin-621 Final term Solved Papers by Fahad Yusha Cell: and
FINALTERM EXAMINATION Spring 2010 FIN621- Financial Statement Analysis (Session - 1) : 90 min Marks: 69 Question No: 1 ( Marks: 1 ) - Please choose one Which one of the following is NOT a type of adjusting
More informationLevel 2: Study Session 09: Equity Investments: Industry and Company Analysis 160 questions.
Level 2: Study Session 09: Equity Investments: Industry and Company Analysis 160 questions. Introduction by the Author : Hi there, CFA fellows, here you are. You see, it doesn't need to be an expensive
More informationMeasuring Vendor Financial Strength
Measuring Vendor Financial Strength Presented by Michael Greene, City of Tempe Presentation Overview Why is it important to consider a firm s financial strength Review the three typical financial statements:
More informationAnalysis and Interpretation of Financial Statements
Analysis and Interpretation of Financial Statements Prof Pieter Pelle INTRODUCTION Objective of financial reporting provide information for decision making Primary statements income statement, balance
More informationCHAPTER 1 Introduction to financial statements
CHAPTER 1 Introduction to financial statements CHAPTER OVERVIEW Chapter 1 introduces you to a variety of financial accounting topics. You will learn about the main forms of business organisation, and the
More informationTelstra Financial Analysis Report Fy2009 Fy2013
Journal of Finance and Accounting 2015; 3(5): 150-158 Published online August 25, 2015 (http://www.sciencepublishinggroup.com/j/jfa) doi: 10.11648/j.jfa.20150305.16 ISSN: 2330-7331 (Print); ISSN: 2330-7323
More informationFamily business characteristics in Slovenia
Family business characteristics in Slovenia Appendix Contents Description of financial indicators......... 1....... Indicators of the state of financing......... 2...... The indicators of the state of
More informationMULTIPLE CHOICE QUESTIONS CHAPTERS 6 10
MULTIPLE CHOICE QUESTIONS CHAPTERS 6 10 CHAPTER 6 1. Each T account contains the exact amount owing to a supplier (A) Sales ledger (B) Purchases ledger (C) General ledger (D) Cash book 2. The Trial balance
More informationResource Sheet Accounting
Resource Sheet Accounting Interpretation of Accounts Student Activity Answers (Q1) In the earlier Boyle plc question, calculate the following (use 2 decimal places where appropriate): (a) Return on Capital
More informationCHAPTER V: DATA ANALYSIS AND INTERPRETATION OF DATA
CHAPTER V: DATA ANALYSIS AND INTERPRETATION OF DATA 5.1. VARIOUS PARAMETERS USED FOR THE DATA ANALYSIS AND TESTING OF HYPOTHESIS Following are the various parameters re used for the analysis & interpretation
More information2. Changes in a company s accounting policies and estimates can significantly distort any inter-firm comparisons and trend analysis.
Chapter 17 Solution 17.1 The limitations of ratio analysis are: 1. Accounting statements present a limited picture only of a business. The information included in the accounts does not cover all aspects
More informationAccounting. Overview 1/8/2019. Intro to Business and Technology
Accounting Intro to Business and Technology Overview Required Assignments Introduction Essential Questions Assignment Key Terms Think About This Assignment Discussion 5 Language of Business Financial Statements
More informationMULTIPLE-CHOICE QUESTIONS
16-3 MULTIPLE-CHOICE QUESTIONS 16- b 16-. d 16-3. e 16-4. b 16-5. d 16-6. c 16-7. e 16-8. e 16-9. d 16-10. b 16-4 CORNERSTONE EXERCISES CE 16-11 Year 1 is the base year. Therefore, every dollar amount
More informationFinancial statements aim at providing financial
Accounting Ratios 5 LEARNING OBJECTIVES After studying this chapter, you will be able to : Explain the meaning, objectives and limitations of analysis using accounting ratios; Identify the various types
More informationChapter # 6. Analysis of Financial Statement. Sameer Hussain.
Analysis of Financial Statement SYLLABUS ACCORDING TO UNIVERSITY OF KARACHI: Financial Statement analysis. Tools of analysis. Dollar/Rupees and percentage change. Trend percentage. Component percentage.
More information