im_ch14 - CHAPTER 14 Financial Statement Analysis: The Big...

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CHAPTER 14 Financial Statement Analysis: The Big Picture ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Describe and apply hori- zontal analysis. 2, 3, 4 1, 3, 4, 6 1, 3, 4 2. Describe and apply vertic- al analysis. 2, 3, 4 2, 5 2, 3, 4 1A 1B 3. Identify and compute ra- tios used in analyzing a company’s liquidity, solvency, and profitability. 1, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 7, 8, 9, 10, 11, 12 5, 6, 7, 8, 9, 10 1A, 2A, 3A, 4A, 5A 1B, 2B, 3B, 4B, 5B 4. Understand the concept of quality of earnings. 17, 18 14-1
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ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Prepare vertical analysis and comment on profitability. Simple 20 - 30 2A Compute ratios from balance sheet and income statement. Simple 20 - 30 3A Perform ratio analysis, and discuss change in financial position and operating results. Simple 20 - 30 4A Compute ratios; comment on overall liquidity and profitability. Moderate 30 - 40 5A Compute selected ratios, and compare liquidity, profitability, and solvency for two companies. Moderate 50 - 60 1B Prepare vertical analysis and comment on profitability. Simple 20 - 30 2B Compute ratios from balance sheet and income statement. Simple 20 - 30 3B Perform ratio analysis, and discuss change in financial position and operating results. Simple 20 - 30 4B Compute ratios; comment on overall liquidity and profitability. Moderate 30 - 40 5B Compute selected ratios, and compare liquidity, profitability, and solvency for two companies. Moderate 50 - 60 14-2
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BLOOM’S TAXONOMY TABLE 14-3
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STUDY OBJECTIVES 1. DESCRIBE AND APPLY HORIZONTAL ANALYSIS. 2. DESCRIBE AND APPLY VERTICAL ANALYSIS. 3. IDENTIFY AND COMPUTE RATIOS USED IN ANA- LYZING A COMPANY’S LIQUIDITY, SOLVENCY, AND PROFITABILITY. 4. UNDERSTAND THE CONCEPT OF QUALITY OF EARNINGS. 14-4
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CHAPTER REVIEW Comparative Analysis 1. (S.O. 1) Comparative analysis may be made on a number of different bases a. Intracompany basis —Compares an item or financial relationship within a company in the current year with the same item or relationship in one or more prior years. b. Intercompany basis —Compares an item or financial relationship of one company with the same item or relationship in one or more competing companies. c. Industry averages —Compares an item or financial relationship of a company with industry av- erages. Tools of Financial Analysis 2. There are three basic tools of analysis: (a) horizontal, (b) vertical, and (c) ratio. Horizontal Analysis 3. Horizontal analysis, also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time to determine the increase or decrease that has taken place, expressed as either an amount or a percentage. In horizontal analysis, a base year is selected and changes are expressed as percentages of the base year amount. Vertical Analysis
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This note was uploaded on 05/08/2008 for the course ACC 210 taught by Professor John during the Spring '08 term at South Central College: Faribault Campus.

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im_ch14 - CHAPTER 14 Financial Statement Analysis: The Big...

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