Ch.3 FIN 351 - Quick Quiz How do you standardize balance...

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Unformatted text preview: Quick Quiz How do you standardize balance sheets and income statements? Why is standardization useful? (Slide 3.4) What are the major categories of ratios and how do you compute specific ratios within each category? (Slide 3.11) What are the major determinants of a firm's growth potential? (Slide 3.30) What are some of the problems associated with financial statement analysis? (Slide 3.34) 3-1 Standardized Financial Statements Common-Size Balance Sheets All accounts = percent of total assets (%TA) Common-Size Income Statements All line items = percent of sales or revenue (%SLS) Standardized statements are useful for: Comparing financial information year-to-year Comparing companies of different sizes, particularly within the same industry Return to Quiz 3-2 Table 3.5 Return to Quiz 3-3 Determinants of Growth Profit margin operating efficiency Total asset turnover asset use efficiency Financial leverage choice of optimal debt ratio Dividend policy choice of how much to pay to shareholders versus reinvesting in the firm Return to Quiz 3-4 Problems with Financial Analysis Conglomerates No readily available comparables Global competitors Different accounting procedures Different fiscal year ends Differences in capital structure Seasonal variations and one-time events Return to Quiz 3-5 ...
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This note was uploaded on 04/28/2011 for the course FIN 351 taught by Professor Christen during the Spring '11 term at Youngstown State University.

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Ch.3 FIN 351 - Quick Quiz How do you standardize balance...

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