Accounting

9.

Financial Statement Analysis

9.1.

Tools of Analysis

9.1.1.

Horizontal Analysis (Trend Analysis)

9.1.1.1.

Year-to-Year Comparisons

9.1.1.2.

Base Year Analysis

9.1.1.3.

Percentage Changes

9.1.2.

Vertical Analysis (Common-Size Statements)

9.1.2.1.

Percentage of Base Amount

9.1.2.2.

Common-Size Income Statement

9.1.2.3.

Common-Size Balance Sheet

9.1.3.

9.1.3.1.

Purpose and Limitations

9.1.3.2.

Industry Benchmarks

9.2.

Key Financial Ratios

9.2.1.

Liquidity Ratios

9.2.1.1.

9.2.1.2.

Acid-Test (Quick) Ratio

9.2.1.3.

9.2.1.4.

Working Capital

9.2.1.5.

Working Capital Turnover

9.2.2.

Activity Ratios

9.2.2.1.

Accounts Receivable Turnover

9.2.2.2.

Inventory Turnover

9.2.2.3.

9.2.2.4.

Days Sales Outstanding

9.2.2.5.

Days Sales in Inventory

9.2.3.

Solvency Ratios

9.2.3.1.

Debt to Assets Ratio

9.2.3.2.

Debt to Equity Ratio

9.2.3.3.

Times Interest Earned

9.2.3.4.

Cash Coverage Ratio

9.2.4.

Profitability Ratios

9.2.4.1.

Gross Profit Rate

9.2.4.2.

9.2.4.3.

Return on Assets (ROA)

9.2.4.4.

Return on Equity (ROE)

9.2.4.5.

Return on Common Stockholders' Equity

9.2.5.

Market Prospect Ratios

9.2.5.1.

Earnings Per Share (EPS)

9.2.5.2.

Price-Earnings (P/E) Ratio

9.2.5.3.

9.2.5.4.

Dividend Payout Ratio

9.2.5.5.

Book Value Per Share

9.3.

Interpreting Financial Ratios

9.3.1.

Industry Comparisons

9.3.2.

9.3.3.

Economic Conditions Impact

9.3.4.

Limitations of Ratio Analysis

9.3.4.1.

Historical Data Limitations

9.3.4.2.

Accounting Method Differences

9.3.4.3.

Seasonal Variations

9.4.

Comprehensive Financial Statement Analysis

9.4.1.

Integrating Multiple Tools

9.4.2.

Assessing Financial Health

9.4.3.

Red Flags and Warning Signs

9.4.3.1.

Declining Profitability

9.4.3.2.

Liquidity Problems

9.4.3.3.

9.4.3.4.

Quality of Earnings Issues

9.4.4.

Credit Analysis

9.4.5.

Investment Analysis

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8. Managerial and Cost Accounting

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1. Introduction to Accounting