Managerial Accounting Chapter 16 notes

Managerial Accounting Chapter 16 notes - Chapter 16:...

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Chapter 16: Financial Statement Analysis Common Size Analysis What does it do: expresses line items or accounts in the financial statements as percentages Two major types: Horizontal and Vertical Analysis Horizontal Analysis Aka Trend analysis Expresses a line item as a percentage of some prior period amount Allows trend over time to be assessed Vertical Analysis Concerned with relationships among items within a particular time period Expresses the line item as a percentage of some other line item for the same period Line items on income statements often are expressed as percentages of net sales; intems on the balance sheet often are expressed as a percentage of total assets Percentages and Size Effects The use of common size analysis makes comparisons more meaningful bc percentages eliminate the effects of size Ratio Analysis What does it do: The second major technique for financial statement analysis. Ratios are fractions or percentages computed by dividing one account or line item amount by another
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This note was uploaded on 02/03/2010 for the course H ADM 121 at Cornell University (Engineering School).

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Managerial Accounting Chapter 16 notes - Chapter 16:...

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