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# week 10 - School of Accounting ACCT 1501 Accounting and...

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School of Accounting ACCT 1501: Accounting and Financial Management 1A Week 10 Ratio Analysis - Basic Student Handout Contents: 1. Introduction 2. Tutorial questions Week 11 3. Lecture slides Lecturer: Dr. Yang Li School of Accounting UNSW Blackboard: http://elearning.unsw.edu.au

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1. Introduction In this week s lectures, you will learn to perform financial statement analysis, especially ratio analysis, to assess the performance and viability of a company. By the end of this week, you should be able to calculate and interpret some basic ratios reflecting a company’s performance, activity, liquidity, financial structure, etc. You should also be able to understand the limitations of ratio analysis, because we are reliant on the historical information provided by the company and that the quality of this information is very much affected by accounting measurement issues and accounting policy choices made by management. Learning objectives At the end of this topic, you should be able to: 1. Explain the purpose of financial ratio analysis 2. Identify types of ratios and their usefulness 3. Identify the limitations of ratio analysis 4. Calculate and interpret the key financial ratios Required readings Trotman & Gibbins Chapter 14: pages 615-631 Other References: Deegan, Craig. 2007. Australian Financial Accounting, 5 h Edition, North Ryde: McGraw Hill Australian Pty Ltd Carlon, S., Mladenovic, R., Loftus, J., Palm, C., Kimmel, P., Kieso, D. E., & Weygandt, J.J., 2009, Accounting, building business skills, Milton, Qld: John Wiley & Sons (3 rd edition)
2. Tutorial Questions Week 11 Preparation Questions Tutorial Questions Students should attempt these questions before the tutorial. Students should attempt these questions before the tutorial. T&G DQ14.1, 14.3, T&G P14.11 T&G Case 14A T&G DQ14.4, 14.5, 14.6, 14.9 T&G P9.13, 14.4 T&Q Case 14B

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1 Accounting and Financial Management 1A Week 10 Ratio Analysis Lecturer: Yang Li Lecture objectives Explain the purpose of financial ratio analysis. Identify types of ratios and their usefulness. Identify the limitation of ratio analysis. Calculate and interpret the key financial ratios. What to do before you start analysing Learn about the company. Understand the decision matter and the decision to be made. Calculate ratios, etc., related to specific problem. Obtain comparative data (e.g. previous period, competitors’ industry). A ratio, in isolation, is almost useless. In order to interpret the ratios calculated it is necessary for the analyst to obtain a thorough understanding of the company, management, business environment, other companies, etc. The greater the understanding, the more useful the analysis. Financial statement analysis overview