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18 - Presentation Deck

# 18 - Presentation Deck - ACC 212 PRINCIPLES OF ACCOUNTING...

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ACC 212: PRINCIPLES OF ACCOUNTING CHAPTER 18: FINANCIAL STATEMENT ANALYSIS PRESENTATION DECK Prepared by: Jill Mitchell, Assistant Professor, NOVA Reference: Weygandt, Jerry, Kieso, and Kimmel. Accounting Principles Unless noted, illustrations are from the referenced text.

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Chapter 18-2 2.1 Explain and apply horizontal analysis. 1. Basics of Financial Statement Analysis 2. Horizontal Analysis 4. Ratio Analysis 1.1 Know the three bases for comparisons of F/S. 1.2 Know the three commonly used tools for F/S analysis. 3.1 Explain and apply basic vertical analysis. 4.1 Describe what information is derived from liquidity, solvency, and profitability ratios. 4.2 Calculate some basic ratios: i) Current ratio ii) EPS iii) Receivables turnover ratio 18: Financial Statement Analysis Course Competencies 3. Vertical Analysis
Chapter 18-3 Analyzing financial statements involves: Basics of Financial Statement Analysis Characteristics Comparison Bases Tools of Analysis 1. Liquidity 2. Profitability 3. Solvency 1. Intra company (within a company) 2. Industry averages 3. Inter company (one or more competing companies) 1. Horizontal 2. Vertical 3. Ratio 1.1 Know the 3 bases for comparisons of F/S. 1.2 Know the 3 commonly used tools for F/S analysis.

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Chapter 18-4 2.1 Explain and apply basic horizontal analysis. Horizontal Analysis Horizontal analysis , also called trend analysis , is a technique for evaluating a series of financial statement data over a period of time. Its purpose is to determine the increase or decrease that has taken place (expressed as an amount or percentage) Horizontal analysis is commonly applied to the balance sheet, income statement, and statement of retained earnings.
Chapter 18-5 Horizontal Analysis Exercise: The comparative condensed balance sheets of Harrison Corporation are presented below. Instructions: Prepare a horizontal analysis of the balance sheet data for Harrison Corporation using 2008 as a base. 2009 2008 Current assets 76,000 \$ 80,000 \$ 99,000 90,000 Intangibles 25,000 40,000 Total assets 200,000 \$ 210,000 \$ Current liabilities 40,800 \$ 48,000 \$ Long-term liabilties 143,000 150,000 Stockholders' equity 16,200 12,000 200,000 \$ 210,000 \$ 2.1 Explain and apply basic horizontal analysis.

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Chapter 18-6 Horizontal Analysis Increase Percentage 2009 2008 (Decrease) Change Current assets 76,000 \$ 80,000 \$ (4,000) \$ -5.0% 99,000 90,000 9,000 10.0% Intangibles 25,000 40,000 (15,000) -37.5% Total assets 200,000 \$ 210,000 \$ (10,000) \$ -4.8% Current liabilities 40,800 \$ 48,000 \$ (7,200) \$ -15.0% Long-term liabilties 143,000 150,000 (7,000) -4.7% Stockholders' equity 16,200 12,000 4,200 35.0% 200,000 \$ 210,000 \$ (10,000) \$ -4.8% Exercise: The comparative condensed balance sheets of Harrison Corporation are presented below. Instructions:
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18 - Presentation Deck - ACC 212 PRINCIPLES OF ACCOUNTING...

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