Accg105 Lecture week 12 2009S3 Fin.Stat.Analysis

Accg105 Lecture week 12 2009S3 Fin.Stat.Analysis - Lecture...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture Week 12 Accg105 Introductory Financial Accounting
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Topics to cover this week: Earning power Irregular items Comparative analysis Ratio analysis Limitations of financial statement analysis
Background image of page 2
Earning Power Current period’s profit is commonly used to estimate future profits and cash flows. However, there may be ‘noise’ due to irregular items included in the reported net profit figure. Frequently, net profit is adjusted for irregular items to obtain ‘earning power’ which is a more useful estimate for future profits.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Irregular items There are 4 common irregular items: 1.Fundamental error: is an error discovered in the current period that has caused information in the financial statements for previous period(s) to be considered unreliable.
Background image of page 4
Irregular items 2. Change in accounting estimates - is a revision of estimates that were used in previous periods’ financial statements. 3. Change in accounting policies - occurs when policies used in the current period are different from the ones used in previous periods.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Irregular items 4.Discontinuing operation: is when a substantial part of an entity has been disposed of or abandoned.
Background image of page 6
Comparative analysis The usefulness of financial statement information is greatly enhanced when the information is compared with other financial data. There are 3 types of comparison:
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1. Intra-company - comparison within a company is often useful to detect changes in financial relationships or trends. 2. Industry average - comparison with the industry average provides information about a company’s relative position within the industry. 3.
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/20/2010 for the course ACCOUTING 22 taught by Professor Mark during the Spring '10 term at SCA NC.

Page1 / 35

Accg105 Lecture week 12 2009S3 Fin.Stat.Analysis - Lecture...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online