Mgmt 200 Spring 2010 Chap 13 Financial Statement Analysis

Mgmt 200 Spring 2010 Chap 13 Financial Statement Analysis -...

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Financial Statement Analysis Chapter 13
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Financial Statement Analysis Purpose Firms strategic decisions as reflected in the financial statements Industry variations Alternative accounting methods Benchmarks Common size financial statements
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Benchmarks Trend analysis Comparing numbers/ratios for a given firm through time Horizontal analysis Vertical analysis Cross-sectional analysis Comparing numbers/ratios across a set of firms at a given point in time Forecast results (expectations) Pre-set numbers (Rules of thumb)
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Common-size Financial Statements Income Statement Set net sales to 100% and recast all the numbers for a given income statement as a percentage of net sales Balance Sheet Set total assets to 100% and recast all the numbers for a given balance sheet as a percentage of total assets Statement of Cash Flows Not applicable
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Liquidity Analysis Working Capital Current ratio Accounts receivable turnover Inventory turnover Cash operating cycle
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Solvency Analysis Debt-to-Equity ratio Times Interest Earned
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Profitability Analysis Return on Assets = Return on sales x Asset turnover ratio Return on common stockholders’ equity = Profit margin ratio x asset turnover ratio x Financial leverage ratio Gross profit ratio
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This note was uploaded on 05/25/2010 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue University-West Lafayette.

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Mgmt 200 Spring 2010 Chap 13 Financial Statement Analysis -...

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