performance assessment, stock turnover, debtor days

Performance - Using financial statements to assess business performance The balance sheet and income statement provide much useful information for

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Using financial statements to assess business performance The balance sheet and income statement provide much useful information for a user of accounts to better  understand how the business is doing. Some useful analytical tasks would include:   Comparing performance over time: A danger with just looking at one year’s results is that the numbers can hide a longer term issue in the  business. By looking at data over several years, it is possible to see whether a trend is emerging.  Public companies  in the UK are required to publish a five-year summary of the income statement to help shareholders  assess trends.   Comparing performance against competitors or the industry as a whole: Assuming that the detailed information is available, a comparison against competitors provides a useful  way for management and shareholders to assess relative performance. Has the business’ revenues grown as fast as close competitors? How has the business performed  compared with the market as a whole? Benchmarking against best-in-class businesses: Comparison against other businesses who are not direct competitors can also be useful – particularly if  they help set the standard that the business aims to achieve.  Care has to be taken with this, though. The  benchmark business might operate in a very different industry, with significantly different profit margins  and balance sheet norms. Potential weaknesses in using published financial information to assess performance
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This note was uploaded on 03/18/2012 for the course ACCT 205 taught by Professor Christensen during the Spring '11 term at Boise State.

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Performance - Using financial statements to assess business performance The balance sheet and income statement provide much useful information for

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