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Study Guide

FIN/571 Version 7

Week 2 Study Guide: Financial Statement Analysis


Readings and Key Terms

Ch. 4 of Fundamentals of Corporate Finance


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Financial statement analysis


Trend analysis
Benchmark
Common-size financial statements
Financial ratio
Insolvency
Financial leverage
Default risk
Standard Industrial Classification (SIC) System
North American Industry Classifcation System (NAICS)

Ch. 18
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Replacement cost
Book value
Enterprise value
Nonoperating assests (NOA)
Terminal value
Cash flow
Free cash flows
Break-even
Dividend discount model (DDM)

Content Overview

Financial ratios
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Understand components of financial ratios.

Calculate key ratio equations


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Liquidity

Current ratio
Quick ratio
Cash ratio

Efficiency

Inventory turnover
Days sales in inventory
Accounts receivable turnover

Copyright 2013, 2011, 2010, 2008 by University of Phoenix. All rights reserved.

Study Guide
FIN/571 Version 7

Leverage

ROE = Net Profit Margin x Total Asset Turnover x Equity Multiplier


ROE = (Net Income / Net Sales) x (Net Sales / Total Assets) x (Total Assets / Total Equity)

Interpret financial ratio results

Earnings per share


Price-earnings ratio

DuPont equation

Gross profit margin


Operating profit margin
Net profit margin
EBIT return on assets
Return on assets (ROA)
Return on equity (ROE)

Market value indicator

Total debt ratio


Debt-to-equity ratio
Equity multiplier
Times interest earned
Cash coverage

Profitability

Days sales outstanding


Total asset turnover
Fixed asset turnover

Interpret financial ratio results against historical company data.


Interpret financial ratio results against industry benchmarks.

Business valuation

Explain why the choice of organizational form is important.


Describe why cash flow and break-even are important in business.

Copyright 2013, 2011, 2010, 2008 by University of Phoenix. All rights reserved.