Chapter 17

Chapter 17 - ANALYSIS OF FINANCIAL STATEMENTS Chapter 17...

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Unformatted text preview: ANALYSIS OF FINANCIAL STATEMENTS Chapter 17 McGraw-Hill/Irwin Slide 2 McGraw-Hill/Irwin Slide 2 Internal Users External Users Financial statement analysis helps users make better decisions. Financial statement analysis helps users make better decisions. Managers Officers Internal Auditors Shareholders Lenders Customers PURPOSE OF ANALYSIS McGraw-Hill/Irwin Slide 3 McGraw-Hill/Irwin Slide 3 FINANCIAL STATEMENT ANALYSIS Informed financial statement analysis begins with knowledge of the company and its industry. Involves a comprehensive analysis of Strategy Competition, regulation, etc Past, current and projected financial performance Fundamental valuation in relation to stock price Our objective in this course is limited to financial performance. McGraw-Hill/Irwin Slide 4 McGraw-Hill/Irwin Slide 4 LET’S ANALYZE KRSIPY KREME… McGraw-Hill/Irwin Slide 5 McGraw-Hill/Irwin Slide 5 Res ults in stand ardi zed, me ani ngf ul sub totals. Items wi th certai n cha ract eristics are grou ped toge ther. Classi fied Financ ial Stateme nts Hel ps identify significant chan ges and trends. Amo unts from sever al years appe ar side by side. Co mp arat ive Fina nci al St atem ent s Present ed as if the two comp anies are a single business unit. Information for the parent and subsidiary are presented. Co nso lidated Fina nci al Stat eme nts FINANCIAL STATEMENTS ARE DESIGNED FOR ANALYSIS McGraw-Hill/Irwin Slide 6 McGraw-Hill/Irwin Slide 6 Horizontal Analysis Horizontal Analysis Comparing a company’s financial condition and performance across time. TOOLS OF ANALYSIS Vertical Analysis Vertical Analysis Comparing a company’s financial condition and performance to a base amount. Ratio Analysis Ratio Analysis Measurement of key relations between financial statement items. McGraw-Hill/Irwin Slide 7 McGraw-Hill/Irwin Slide 7 RATIO ANALYSIS McGraw-Hill/Irwin Slide 8 McGraw-Hill/Irwin Slide 8 Intracompany Intracompany (e.g., current year vs. previous year)(e....
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This note was uploaded on 03/12/2012 for the course BUSI 1002 taught by Professor Liu during the Winter '10 term at HKU.

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Chapter 17 - ANALYSIS OF FINANCIAL STATEMENTS Chapter 17...

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