Beruflich Dokumente
Kultur Dokumente
Financial Analysis
Chapter
McGraw-Hill/Irwin
Chapter Outline
3-2
Ratio Analysis
Financial ratios
Used to weigh and evaluate the operating
performance of a firm.
Used to compare performance record as against
other firms in the industry.
Analyzing ratios and numerical calculations.
Such data is provided by various organizations.
3-3
Profitability ratios
1. Profit margin.
2. Return on assets (investment).
3. Return on equity.
B.
Receivable turnover.
Average collection period.
Inventory turnover.
Fixed asset turnover.
Total asset turnover.
3-4
Liquidity ratios
9. Current ratio.
10. Quick ratio.
D.
3-5
Types of Ratios
Profitability ratios
Measurement of the firms ability to earn an
adequate return on:
Sales
Assets
Invested capital
3-7
3-8
Profitability Ratios
3-9
3-10
3-11
Du Pont Analysis
3-12
3-13
3-14
3-15
Liquidity Ratios
3-16
3-17
3-18
3-19
Trend Analysis
3-20
3-21
3-22
3-23
3-24
Deflation
Actual reduction of prices affecting everybody
due to bankruptcies and declining profits.
3-25
3-26
Explanation of Discrepancies
3-27
Explanation of Discrepancies
(contd)
Sales
Use of defer recognition until each payment is
received or full recognition at the earliest
possible date.
3-28
Explanation of Discrepancies
(contd)
Extraordinary gains/ losses
Inclusion of events when computing current
income or leaving them out.
Net income
Use of different methods of financial reporting.
3-29
Problems
Problem 17 page 72
Problem 28 page 77
3-30