Day 20 - Financial Statement Analysis

Day 20 - Financial Statement Analysis - Financial Statement...

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Financial Statement Analysis Day 20
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What is Financial Statement Analysis?  Financial Statement Analysis (aka Ratio  Analysis) refers to a set of procedures that  transforms data from financial statements into  information that can be used for future decision  making.    The most common procedure is to calculate  and analyze a series of financial ratios (hence,  the name  Ratio Analysis ).
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How is it used?  The goal of financial statement analysis is to  obtain information as to your firm’s  financial  strengths and weaknesses  We do this by making comparisons: Inter-temporal  (across time) analysis within  your company, using data spanning two years  or more; and Cross-sectional  (across firms) analysis,  comparing your firm’s performance to other  firms in your industry (your competitors).
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Four categories of financial ratios 1. Liquidity Ratios : measure the ability of the firm to pay its short-term debts   as they come due (and to meet any unexpected needs for  cash). 2. Activity (aka Asset Management) Ratios : measure the effectiveness of a firm’s management in  using the assets  that are available. 3. Profitability Ratios
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This note was uploaded on 02/06/2012 for the course ECON 111 taught by Professor Risnit during the Spring '11 term at SUNY Suffolk.

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Day 20 - Financial Statement Analysis - Financial Statement...

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