Chapter 12 lecture notes - Gross Margin Operating Margin...

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Week 5 Financial Statement Analysis I Kenny Zheng AIM 2301 Financial Accounting
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Lecture Outline 1 Financial Statement Analysis
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Financial Statement Analysis - Overview Value of stock = f (future profitability, risk) Techniques: 1. Trend analysis 2. Common sized financial statements 3. Financial ratios Future profitability Risk 2
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Financial Statement Analysis A ratio which compares I/S number with B/S number will use an average of B/S numbers. Compare the company ratio with industry average. Compare the ratio over time. Net Income Average Shareholders' Equity Return on Equity = Profitability Ratios 3
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Financial Statement Analysis Profit Margin Cost control Pricing Profitability Ratios Net Income Sales Average Total Assets Sales Average Total Assets Average Shareholders' Equity _ _ ROE = Profit Margin
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Unformatted text preview: Gross Margin Operating Margin Gross Profit Sales Operating Income Sales • Asset Turnover Ratio • Asset utilization Asset Turnover A/R Turnover Working Capital Turnover Inventory Turnover Sales AVG A/R Cost of Goods Sold AVG Inventory Sales AVG Working Capital • Financial Leverage Ratio AVG S/H EQ + AVG LIAB AVG S/H EQ AVG LIAB AVG S/H EQ 1 + Financial Leverage Debt Equity 1 + = 4 Financial Statement Analysis Risk Ratios 1. Short-term liquidity ratio Current Assets Current Liability Current ratio = 1. Long-term solvency ratio Total Debt Total Equity Debt to Equity ratio = Net Income Before Interests & Texes Interest Expense Interest Coverage Ratio = 5 • Article – Return on Equity Example Financial Statement Analysis 6...
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This note was uploaded on 11/24/2009 for the course BA 2301 taught by Professor Mattpolze during the Fall '08 term at University of Texas at Dallas, Richardson.

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Chapter 12 lecture notes - Gross Margin Operating Margin...

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