chapter 16 - COPYRIGHTZHULI 1 Chapter 16 Financial...

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Unformatted text preview: COPYRIGHTZHULI 1 Chapter 16 Financial statement analysis COPYRIGHTZHULI 2 Objectives 1. Calculate and interpret measures of a firms leverage, liquidity, efficiency, and profitability 2. Use the Du Pont formula to understand the determinants of the firms return on its assets and equity 3. Valuate the potential pitfalls of ratios based on accounting data 4. Understand some key measures of firm performance such as market value added and economic value added COPYRIGHTZHULI 3 Content Financial ratios The Du Pont system Using financial ratios Measuring company performance The role of financial ratios COPYRIGHTZHULI 4 Income statement : financial statement that shows the revenues, expenses, and net income of a firm over a period of time. COPYRIGHTZHULI 5 Common-size income statement : income statement that presents items as a percentage of revenues. COPYRIGHTZHULI 6 Balance sheet : financial statement that shows the value of the firms assets and liabilities at a particular time. COPYRIGHTZHULI 7 Common-size balance sheet : balance sheet that presents items as a percentage of total assets. COPYRIGHTZHULI 8 Four types of financial ratios 1. Leverage ratios show how heavily the company is in debt. 1. Liquidity ratios measure how easily the firm can lay its hands on cash. 1. Efficiency or turnover ratios measure how productively the firm is using its assets. 1. Profitability ratios are used to measure the firms return on its investments. COPYRIGHTZHULI 9 Leverage ratios Debt increases returns to shareholders in good times and reduces them in bad times, it is said to create financial leverage....
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chapter 16 - COPYRIGHTZHULI 1 Chapter 16 Financial...

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