Module 3 Notes.docx - ACCT 701 u2013 LSUS Chapter 17...

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ACCT 701 – LSUSChapter 17 – Financial StatementsHorizontal Analysis – highlight change in company performance over time, trend or time series, compares changes from period to period, calc degree of change in $ or %. Subtract Base Period from Current Period. % = Change/Base-Requires min 2 years financial statements, so one year can compare to the other-Earlies year available = Base YearVertical Analysis – common size, express relationship between each line of financial statement using base amount in same period. Report each line item as % to compare previous & other’s performance.-Financial Statement, Net Sales = Base Amount-Balance Sheet, Total Assets = Base Amount-Statement of Cash Flows - % total cash flowProfitability Analysis – opportunity for business owners & managers to evaluate ability of business to generate profit in future-Assets Turnover Ratio = Net Sales / Average Total AssetsoEffectiveness of business’s asset utilization to generate revenueoAverage Total Assets = Add total assets for 2 year period / 2o

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