Lecture 4 - 6 - Lecture 4 1 Common Size Financial...

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Lecture 4: 1.) Common Size Financial Statements a. Financial statements give us good information regarding the position and performance of a firm b.What do we do if we want to compare one firm’s position/performance with another form’s?i.Two options: 1. Compare financial ratios 2. Compare common size financial statements c. Example – Walmart and Target i. At the end of FY 2012, Walmart had $53 billion in long-term debt ii. At the end of FY 2012, Target had $17 billion in long-term debt iii. Target, however, is a much smaller company iv.What is the ratio of long-term debt to total assets? vi. For Target, LTD/TA = 17/48 = 35% d. If we scale each item in the balance sheet as a portion of total assets, we can compare different firms/years directly i. Long term asset – long term debt. ii. More interest cost, became better at other expenses but are not better off than the previous year. 2.) DuPont Identity a. Return on equity: Net Income/Book Value of Equity b.
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  • Spring '14
  • GeraldAbdesaken
  • Balance Sheet, Options, Generally Accepted Accounting Principles, size financial statements

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