chapter 2

chapter 2 - 4 main reports: Income statement, Balance...

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4 main reports: Income statement, Balance Sheet: Assets, Liabilities, Equity, (Single date) Statement of Retained Earnings: How earnings are distributed Statement of Cash Flows: operations-businesses of the firm Investment- Allocating resources Financing- Borrowings or repayments Ratio Analysis Gauge, measure, compare, firms health and operations Compare different times and different industries 1. Cross Sectional: comparing different firms 2. Time series: same firm, different times 3. Firm to Firm / Firm to Industry 5 basic ratios liquidity, activity, debt, profitability, market value Liquidity: the ability of the firm to meet the short term needs, solvency of the firm, ability to meet payments -current ratios: current assets / current liabilities *current > 1 year -Acid ratio: (current assets – Inventory) / Current Liabilities *takes into account inventory that might be 1/3 complete, not ready for sale Activity: Measure the speed with which various accounts are converted into sales or
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chapter 2 - 4 main reports: Income statement, Balance...

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