Our course aims to achieve the following learning objectives
1.The ability to apply accounting tools in business decision
making,
2.The ability to examine the importance of accounting tools to
decision making
3.The ability to describe inherent limitations in accounting
information
In this context our second topic is focused on …..
Financial Statement Analysis
“Suppose one of you wants to build a tower. Won’t you
first sit down and estimate the cost to see if you have
enough money to complete it? Luke 14:28
After listening to the posdcast, there was one theme that
stuck out to me: there is no reward (or very little) without
risk
the power of social media is the hashtag #saveAMC
If the company followed the creditors' ideas, AMC would
not be there anymore.
creativity
Part III: Profitability Measures
Give, and it will be given to you. A good measure, pressed down, shaken
together and running over, will be poured into your lap. For with the
measure you use, it will be measured to you.” (Luke 6:38)
Profitability: Big Picture
What is the purpose of an income statement?
• Income statements are created to provide users(investors) with
information on the financial performance of the company• Sales in relation to (various) expenses.
• End Goal: How much profit did the company make?
Sample Student Response
Gross profit margin is the ratio of gross profit divided by
net sales. Gross profit is found by subtracting the cost of
goods sold (COGS) from net sales.
Meanwhile, operating profit margin is the ratio of operating
profit divided by net sales. Operating profit is found by
subtracting operating expenses from gross profit.
We get earnings per share from Net
income
Net Profit Margins for a selection of firms
(2020)
Firm
Net Profit Margin
Netflix
11.04%
Spotify
-7.37%
Disney
-4.38%
Alphabet/ Google
22.06%
Apple
20.92%
Microsoft
30.96%
Tesla
2.19%
Return on Investments
Mathew 25 14:30
Source: https://tifwe.org/resource/the-parable-of-the-talents/
Measures
Sample Student Answer
Return on assets looks at the efficiency of how assets are used by
management, without considering whether they were financed by debt or
equity capital.
Meanwhile, return on equity just examines the return on stockholders’
investment, only looking at equity capital, not debt capital.
S&P 500 2020 Return: 18.4%
Firm
ROA (%)
ROE(%)
Netflix
7.03
25
Spotify
-9.18
-20.713
Disney
-1.21
-2.76
Alphabet/ Google
13.00
18.1
Apple
17.73
87.87
Microsoft
14.69
37.43
Tesla
1.65
3.73
Source: Macrotrends.net
• Chapter 14 HW due today
• Pre Class Work For Thursday Chapter 15
• Chapter 15 Homework Due Friday
• Assessment : 03/08 in class