Chap4 - Chapter 4 Analysis of Financial Statements 1 Learning Objectives Measure and interpret financial ratios Analyze trends in financial ratios

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Chapter 4 Analysis of Financial Statements 1
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Learning Objectives Measure and interpret financial ratios. Analyze trends in financial ratios. Manipulate financial ratios to find another ratio. 2
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Ratio Analysis Examines firm’s management of various facets of the company’s business through its financial statements. Scales balance sheet and income statement information for easy comparison across time or to other companies. 3
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Two common approaches Trend Analysis - looks at changes in one company’s ratios over time. Benchmarking: Comparison or Industry Analysis - compares company’s ratios against a similar company or against industry-wide ratios. To illustrate trend analysis, we will compare AT&T’s ratios over the last 5 years To illustrate benchmarking, we will compare AT&T’s ratios to Verizon’s ratios over the last 2 years. 4
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Areas Examined by Ratio Analysis Liquidity - measures the ability to meet short-term obligations Asset Management - measures the ability to
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This note was uploaded on 02/14/2011 for the course FIN 221 taught by Professor Dyer during the Spring '09 term at University of Illinois, Urbana Champaign.

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Chap4 - Chapter 4 Analysis of Financial Statements 1 Learning Objectives Measure and interpret financial ratios Analyze trends in financial ratios

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