C1 Chapter 13

C1 Chapter 13 - Chapter 13 Financial Statement Analysis...

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13-1 Chapter 13 Financial Statement Analysis Financial Accounting 1st Canadian ed. by PNCS-B
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13-2 Shareholders Financial Statement Analysis Creditors Management Will I be paid? How good is our investment? How are we performing?
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13-3 Horizontal Analysis Net Sales CGS Gross Profit Net Earnings Increase (Decrease) 2006 2005 Dollars Percent $24,000 $20,000 $4,000 20 % 18,000 14,000 4,000 19 % 6,000 6,000 0 0% 1,720 2,300 (580) (25%) Henderson Company (in thousands)
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13-4 Vertical Analysis Net Sales CGS Gross Profit Net Earnings Increase (Decrease) 2006 Percent 2005 Percent $24,000 100.0% $20,000 100.0% 18,000 75.0 14,000 70.0 6,000 25.0 30.0 1,720 7.1 2,300 11.5 Henderson Company (in thousands)
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13-5 Trend Analysis Return on Avg. Equity 2006 2005 2004 2003 2002 30.1% 29.0% 26.8% 28.4% 28.9% Henderson Company Tracking items over a series of years
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13-6 Vertical Analysis Common-size statements recast items as a percentage of a selected item Allows comparisons of companies of different size Compares percentages across years to identify trends % % %
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13-7 Dollars Percent $24,000 100.0% 18,000 75.0 6,000 25.0% 3,000 12.5 3,000 12.5% 140 0.6 2,860 11.9% 1,140 4.8 $ 1,720 7.1% Common-Size Statements Sales revenue Cost of goods sold Gross profit Selling & admin. exp. Operating income Interest expense Income before tax Income tax expense Net income
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13-8 Liquidity Analysis Nearness to cash Ability to pay debts as they become due Cash Ratios Turnover Ratios Working Capital Ratios
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13-9 Working Capital Excess of current assets over current liabilities Lacks meaningful comparisons for companies of different size -
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13-10 Current Ratio Measure of short-term financial health Consider composition of current assets Rule of thumb 2:1
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13-11 Acid-Test (Quick) Ratio Stricter test of ability to pay debts Excludes inventories and prepaid assets Quick Assets Current Liabilities
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This note was uploaded on 10/19/2011 for the course ACCT 2242 taught by Professor Cumming during the Spring '11 term at Dalhousie.

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C1 Chapter 13 - Chapter 13 Financial Statement Analysis...

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