2-7 Financial Statement Analysis

835 088 117 2 acid test ratio 020 020 046 1 debt to

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Unformatted text preview: 13) (2012) (2013) (2013) (2012) (2013) Ideal Current ratio 0.835 0.88 1.17 2 Acid-test ratio 0.20 0.20 0.46 1 Debt-to-equity ratio 1.485 1.55 1.91 Close to 1 Return on sales 3.65% 3.54% 4.09% High Return on equity 20.8% 20.72% 18.1% High Earnings per share $5.02 $4.52 $4.61 High Inventory turnover 8.23 6.46 Varies per Varies industry industry 8.05 Caveats on Financial Statement Analysis Caveats Industry matters! Size matters! You can be tighter in some areas of your You financial structure, if you have more leeway in others. others. How to Read a Corporate Annual Report How Read management’s discussion of changes in operations. Try to identify strengths or weaknesses. weaknesses. Review the firm’s consolidated balance sheet. (Its assets, liabilities, and owner’s equity.) (Its Analyze the Income Statement. Look beyond the year (Sales drops can spell trouble). the Review the statement of changes in cash flows. Review Review auditor’s opinion. Review Take-aways Take-aways Financial statement analysis tries to discern the Financial liquidity, profitability and efficiency of an enterprise; enterprise; Ratio analysis, the standard technique used to Ratio perform financial statement analysis, depends on industry, size, and interdependences within the financial statements. the...
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