chap14 - Set sales equal to 100 and express the rest of the...

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1 Acct 284 Chap. 14 CHAPTER 14 Analyzing Financial Statements
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2 Acct 284 Chap. 14 Use of Financial Statement Information Users: * investors *analysts *creditors * government *labor organizations Types of information provided: * historical *current *future Influences on investment decision: * economy wide *industry * individual company factors
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3 Acct 284 Chap. 14 Time Series Analysis Time Series analysis sets a base year as 100% (usually the earliest year) and then expresses each item as a percentage of the base year (trend percentages). Use to see if selling and administrative is growing faster than sales, for example.
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4 Acct 284 Chap. 14 Component Percentages Also known as common size statements
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Unformatted text preview: Set sales equal to 100% and express the rest of the income statement as a percentage of sales. For balance sheet, set total assets as 100%. Allows comparisons of how things like gross profit rate have changed over time 5 Acct 284 Chap. 14 Ratio Analysis Ratio analysis compares items in the financials (and certain external items)to each other to look for relationships. Three main categories of ratios: 1. Profitability: measures the overall success of a company 2. Liquidity: measures the ability to meet currently maturing debts 3. Solvency: measures the ability to meet long-term obligations...
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chap14 - Set sales equal to 100 and express the rest of the...

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