Beruflich Dokumente
Kultur Dokumente
Principles
Second Canadian Edition
Weygandt · Kieso · Kimmel · Trenholm
Prepared by:
Carole Bowman, Sheridan College
CHAPTER
19
FINANCIAL STATEMENT
ANALYSIS
BASICS OF
FINANCIAL STATEMENT ANALYSIS
• Three types of
comparisons:
– Intracompany basis
– Intercompany basis
– Industry averages
COMPARATIVE ANALYSIS
• Three tools:
– Horizontal analysis
– Vertical analysis
– Ratio analysis
HORIZONTAL ANALYSIS
2002 2001 .
Assets Amount Percent Amount Percent
Current assets $1,496.5 29.6 $1,467.7 30.1
Capital assets 2,888.8 57.2 2,733.3 56.9
Other assets 666.2 13.2 636.6 13.0
Total assets $5,051.5 100.0% $4,837.6 100.0%
RATIO ANALYSIS
Liquidity Ratios
Measure short-term ability
of the enterprise to pay its
maturing obligations and to
meet unexpected needs for
cash.
Profitability Ratios
Revenues Expenses
- = Net
Income
Measure the income or
operating success of an
enterprise for a given period
of time.
Since 1892
Solvency Ratios
XYZ Measure the ability of the
Co. enterprise to survive over a
long period of time.
LIQUIDITY RATIOS
• Current ratio
• Acid test ratio
• Cash current debt coverage ratio
• Receivables turnover
• Collection period
• Inventory turnover
• Days sales in inventory
CURRENT RATIO
Current ratio =
Current assets
Current liabilities
(Discussed in Chapter 4)
ACID TEST RATIO
(Discussed in Chapter 9)
CASH CURRENT DEBT
COVERAGE RATIO
Receivables turnover =
Net credit sales
Average net receivables
(Discussed in Chapter 9)
COLLECTION PERIOD
Collection period =
365 days
Receivables turnover
(Discussed in Chapter 9)
INVENTORY TURNOVER
Inventory turnover =
Cost of goods sold
Average inventory
(Discussed in Chapter 5)
DAYS SALES IN INVENTORY
Days in inventory =
365 days
Inventory turnover
(Discussed in Chapter 5)
PROFITABILITY RATIOS
Profit margin =
Net income
Net sales
(Discussed in Chapter 5)
GROSS PROFIT MARGIN
(Discussed in Chapter 5)
CASH RETURN ON SALES
Asset turnover =
Net sales
Average total assets
Return on assets =
Net income
Average total assets
Price-earnings ratio =
Share price
Earnings per share
Payout ratio =
Cash dividends
Net income
Dividend yield =
Cash dividends per share
Share price
Interest coverage =
Income before interest expense
and income tax expense (EBIT)
Interest expense
• Estimates
• Historical cost
• Alternative
accounting
methods
• Atypical data
• Diversification
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