feb 11th - Thursday Analysis of financial statements This...

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Thursday, February 11, 2016 Analysis of financial statements This puts things in perspective. It leads to you looking at a lot of ratios. We will look at 5 categories of ratios—if all the ratios are satisfactorily or good, you ould buy the firm (invest in the company by buying stocks). 1) Liquidity ratio—liquidity refers to how quickly you can turn your asset into cash. On the balance sheet, current assets would fall under here. Current assets are things that have life span of a year or less, so it can be quickly converted, hence falls under here. Under here, we’ll look at 2 ratios: Current ratio = current assets current liabilities = for 2014, 465/130= 3.58 and for 2013, 400/105 = 3.81 **Comparative analysis is good—I think this is when the company’s average is greater than the industry average. Trend analysis is the analysis of the trend for the company. Quick ratio= current assets inventory current liability = for 2014, 465 270 130 = 1.5 . for 2013, 400 200 105 = 1.9 If the industry average for 2014 is 2.2 and for 2013 is 2.1, then the
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