Lecture_Notes_-_Assign_10

Around 12 if monthly billing cell phone bill around 4

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around 12 if monthly billing (cell phone bill) around 4 if quarterly billing etc Inventory Analysis 4. Inventory Turnover = Cost of Merchandise Sold/average inventory Should vary with industry: convenience stores – very high airplane manufacturing – very low Equity Ratios 5. Earnings per Share (EPS) = (Net Income – Preferred Dividends)/common shares outstanding The higher the better – varies by industry 6. Price-Earnings Ratio = market price per share / EPS The higher the better for future earnings – varies by industry If high, company is expected to grow and greater risk If low, company is stable or good value for the price Financial Statement Analysis 1. Vertical analysis(Common size) Mainly used on the income statement. Looks at items as a percentage of revenue (net sales). Formula = any amount on the income statement / net sales. Expressed as a percentage. 2. Horizontal analysis Compares current year to prior year Formula 1: current year – prior year = change in dollars Formula 2: (current year – prior year) / prior year = % change
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