Chapter2a+notes

Chapter2a+notes - Chapter 2 Financial Statement Analysis...

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Financial Statement Analysis Chapter 2
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1 Fall 2008 Example: Cathay Pacific Airways Ltd. ± The decline left Cathay valued at 14 times estimated 2008 profit , compared with an average of 16 for the index. ± The stock is getting cheap and is becoming attractive for a long- term holding.” ± The carrier's cash ratio , an indicator of liquid assets compared to liabilities, is 70 percent , the fourth-highest in the Asia Pacific Airlines Index. ± The company's profit margin of 9.3 percent is almost double the average of 5.3 percent for the index, while its debt-to-asset ratio of 36 is lower than those of China Southern Airlines Co., China Eastern Airlines Co. and Air China Ltd., the country's three biggest carriers. ± “Cathay is financially healthy , unlike mainland rivals,” said Francis Chu, a Hong Kong-based analyst at South China Securities who advises buying shares.
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2 Fall 2008 Accounting Information and Ratios ± Accounting number is the language of business finance ± Good working knowledge of financial statements is essential ± Financial ratios summarize specific aspects of a firm’s financial position ± Ratios provide useful information for ² Performance evaluation – compensation and comparison between divisions ² Planning for the future – guide in estimating future cash flows ² External uses by suppliers, creditors and shareholders ± Ratios allow for better comparison through time or between companies
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3 Fall 2008 Course Plan Financial Management Foundation and Tools Valuation Short-term Financial Management Risk and Return Long-term Financing Decisions Financial Statement Analysis Capital Budgeting Working Capital Management Cost of Capital Capital Structure Valuation Principle Time Value of Money Bonds and Stocks Payout Policy Investment Decision Rules
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4 Fall 2008 Outline Financial Statements Balance Sheet Income Statement Profits vs.
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Chapter2a+notes - Chapter 2 Financial Statement Analysis...

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