Section+06+-+Ch+14 - Introduction to Financial Accounting...

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Introduction to Financial Accounting – UGBA 102A Discussion Session 06 Chapter 14: Analyzing Financial Statements Company’s Strategy: ROE = Net Profit Margin x Asset Turnover Ratio x Financial Leverage = × Net IncomeAverage Stockholders'Equity Net IncomeNet Sales Net SalesAverage Total Assets Average Total AssetsAverage Stockholders'Equity Financial Statement Analysis: Time Series Analysis Comparison with similar companies Ratio and Percentage Analysis: Component Percentages Expresses each item on a financial statement as a percentage of a single base amount (i.e. Income Statement with Sales as the base amount). Tests of Profitability ( )= Return on Equity ROE Net IncomeAverage Stockholders'Equity + Return on Assets ROA Net Income Interest Expense Net of TaxAverage Total Assets - Financial Leverage Percentage Return on Equity Return on Assets .# Earnings per Share EPS Net IncomeAvg of common shares outstanding Quality of Income Cash Flows from Operating ActivitiesNet Income
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Section+06+-+Ch+14 - Introduction to Financial Accounting...

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