Popular in ACCY 202
Popular in Department
This 2 page Study Guide was uploaded by Sophia Ronzetti on Wednesday February 11, 2015. The Study Guide belongs to Accounting 202 at University of Mississippi taught by Taylor in Spring2015. Since its upload, it has received 159 views.
Reviews for Chapter 13
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/11/15
Chapter 13 All info is from Financial and Managerial Accounting Textbook Financial Statement Analysis uses generalpurpose nancial statements to make decisions This involves taking data from statements and transforming them into useful information including comparative statements purpose both internal and external users use this information to make better and more informed nancial and managerial decisions Building blocks a 906 Liquidity and ef ciency meet short term obligations and generate revenues Solvency generate future revenues and meet long term obligations Pro tability provide nancial rewards to attract and retain nancing Market prospects generate positive expectations for goods or services provided in the market information for analysis a b general purpose nancial statements these reports are used for gathering the data used by users income statement balance sheet statement of retained earnings cash ows and notes nancial reporting communication on nancial information used in making business decisions standards for comparisons a b c d intercompany company under analysis compares data to their own prior performance competitor competitors of a company can be used for comparisons industry company can compare their own data to industry statistics available guidelines general standard that are developed from experience can be used to compare data with tools for analysis a horizontal analysis used to compare things across time using side by side columns on a single statement called comparative i dollar changes analysis period amtbase period amt ii percent changes analysis pr amtbase pr amt base period amt x 100 iii trend analysis analysis period amtbase period amtx100 vertical analysis used to evaluate items or groups of items speci c to a base amount For a common size balance sheet the base amount is usually total assets i common size percent analysis amtbase amt x 100 ratio analysis ratios are used to nd trends they are usually future oriented and can be interrelated differently 2 These ratios determine liquidity m ef ciency i working capital current assets current liabilities ii current ratio current assetscurrent liabilities iii acidtest ratio cash short term investments current receivablescurrent liabilities iv accounts receivable turnover net sales average accounts receivable net v inventory turnover cogs average inventory vi days sales uncollected AR net net sales x 365 vii days sales in inventory ending inventorycogs x 365 viii total asset turnover net salesaverage total assets 2 These ratios determine solvency i debts and equity ratio total liabilitiestota equity ii times interest earned income before interest expense and income taxesinterest expense 1 these ratios determine pro tability I pro t margin net incomenet sales ii return on total assets net incomeaverage total assets a important to note pro t margin x total asset turnover return on total assets net income net sales x net sales av Total assets Net income Av total assets iii return on common stockholders equity net income preferred dividends average common stockholders equity these ratios determine market prospects iv price earning ratio market price per shareearning per share v dividend yield annual cash dividends per sharemarket price per share
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'