FINANCIAL STATEMENT ANALYSIS - Download as DOC by 0m63vv

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									                FINANCIAL STATEMENT ANALYSIS

1.   Comparative analysis of financial statements.


     a. Trend analysis. (Horizontal analysis)
     b. Common-size statements. (Vertical analysis)


2.   Ratio analysis—the common stockholder


                                   Net income - Preferred dividends
     a. Earnings per share =
                                 Average common shares outstanding


                                       Gross margin
     b. Gross margin percentage =
                                          Sales


                                Market price per share
     c. Price-earnings ratio=
                                 Earnings per share


                                  Dividends per share
     d. Dividend payout ratio=
                                  Earnings per share


                                 Dividends per share
     e. Dividend yield ratio=
                                Market price per share


     f.    Return on = Net income+[Interest expense×(1-Tax rate)]
          total assets            Average total assets


                               Net income - Preferred dividends
     g. Return on common =
        stockholders' equity Average common stockholders' equity



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                      Common stockholders' equity
     h. Book value =
         per share Number of common shares outstanding


3.   Ratio analysis—the short-term creditor


     a. Working capital = the excess of current assets over current
        liabilities


                          Current assets
     b. Current ratio=
                         Current liabilities
     c.
                             Cash+Marketable securities+Current receivables
          Acid-test ratio=
                                          Current liabilities

     d. Accounts receivable turnover and average collection period


          Accounts receivable =          Sales on account
               turnover         Average accounts receivable balance
          Average collection =          365 days
               period          Accounts receivable turnover


     e. Inventory turnover and average sale period


                                     Cost of goods sold
          Inventory turnover=
                                 Average inventory balance
                                      365 days
          Average sale period=
                                  Inventory turnover




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4.   Ratio analysis—the long-term creditor


                                  Earnings before interest and taxes
     a. Times interest earned=
                                          Interest expense


                                   Total liabilities
     b. Debt-to-equity ratio=
                                Stockholders' equity




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