Boundless Lecture Slides
Available on the Boundless Teaching Platform
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless Teaching
Platform
Boundless empowers educators to engage their students
with affordable, customizable textbooks and intuitive
teaching tools. The free Boundless Teaching Platform
gives educators the ability to customize textbooks in
more than 20 subjects that align to hundreds of popular
titles. Get started by using high quality Boundless books,
or make switching to our platform easier by building from
Boundless content pre-organized to match the assigned
textbook. This platform gives educators the tools they
need to assign readings and assessments, monitor
student activity, and lead their classes with pre-made
teaching resources.
Using Boundless Presentations
The Appendix
The appendix is for you to use to add depth and
breadth to your lectures. You can simply drag and
drop slides from the appendix into the main
presentation to make for a richer lecture
experience.
Get started now at:
http://boundless.com/teaching-platform
Free to edit, share, and copy
Feel free to edit, share, and make as many copies
of the Boundless presentations as you like. We
encourage you to take these presentations and
make them your own.
If you have any questions or problems please email:
educators@boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
About Boundless
Boundless is an innovative technology company making education more affordable and
accessible for students everywhere. The company creates the world’s best open educational
content in 20+ subjects that align to more than 1,000 popular college textbooks. Boundless
integrates learning technology into all its premium books to help students study more efficiently
at a fraction of the cost of traditional textbooks. The company also empowers educators to
engage their students more effectively through customizable books and intuitive teaching tools
as part of the Boundless Teaching Platform. More than 2 million learners access Boundless free
and premium content each month across the company’s wide distribution platforms, including its
website, iOS apps, Kindle books, and iBooks. To get started learning or teaching with
Boundless, visit boundless.com.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing
Financial
Statements
Standardizing Financial Statements
Overview of Ratio Analysis
Profitability Ratios
Asset Management Ratios
Liquidity Ratios
Www/boundless.com/finance?campaign_content=book_1
92_chapter_3&campaign_term=Finance&utm_campaign=
powerpoint&utm_medium=direct&utm_source=boundless
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing
Financial
Statements
(continued)
Debt Management Ratios
Market Value Ratios
The DuPont Equation, ROE, ROA, and Growth
Using Financial Ratios for Analysis
Considering Inflation's Distortionary Effects
Www/boundless.com/finance?campaign_content=book_1
92_chapter_3&campaign_term=Finance&utm_campaign=
powerpoint&utm_medium=direct&utm_source=boundless
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing
Financial
Statements
(continued)
Other Distortions
Www/boundless.com/finance?campaign_content=book_1
92_chapter_3&campaign_term=Finance&utm_campaign=
powerpoint&utm_medium=direct&utm_source=boundless
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements > Standardizing Financial Statements
Standardizing Financial Statements
• Balance Sheets
• Income Statements
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Standardizing Financial Statements
Balance Sheets
• Of the four basic financial statements, the balance sheet is the only statement
which applies to a single point in time of a business' calendar year.
• The main categories of assets are usually listed first (in order of liquidity) and are
followed by the liabilities.
• The difference between the assets and the liabilities is known as "equity".
• Balance sheets can either be in the report form or the account form.
• A balance sheet is often presented alongside one for a different point in time
(typically the previous year) for comparison.
• Guidelines for balance sheets of public business entities are given by the
Balance sheet
View on Boundless.com
International Accounting Standards Board and numerous country-specific
organizations/companies.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/standardizing-financial-statements37/balance-sheets-202-
Analyzing Financial Statements > Standardizing Financial Statements
Income Statements
• Income statement displays the revenues recognized for a specific period, and the
cost and expenses charged against these revenues, including write offs (e.g.,
depreciation and amortization of various assets) and taxes.
• The income statement can be prepared in one of two methods: The Single Step
income statement and Multi-Step income statement.
• The income statement includes revenue, expenses, COGS, SG&A, depreciation,
other revenues and expenses, finance costs, income tax expense, and net
income.
Income statement
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/standardizing-financial-statements37/income-statements-203-
Analyzing Financial Statements > Overview of Ratio Analysis
Overview of Ratio Analysis
• Classification
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Overview of Ratio Analysis
Classification
• Ratio analysis consists of the calculation of ratios from financial statements and is
a foundation of financial analysis.
• A financial ratio, or accounting ratio, shows the relative magnitude of selected
numerical values taken from those financial statements.
• The numbers contained in financial statements need to be put into context so that
investors can better understand different aspects of the company's operations.
Ratio analysis is one method an investor can use to gain that understanding.
Business analysis and profitability
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/overview-of-ratio-analysis38/classification-204-
Analyzing Financial Statements > Profitability Ratios
Profitability Ratios
• Operating Margin
• Profit Margin
• Return on Total Assets
• Basic Earning Power (BEP) Ratio
• Return on Common Equity
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Profitability Ratios
Operating Margin
• The operating margin equals operating income divided by revenue.
• The operating margin shows how much profit a company makes for each dollar in
revenue. Since revenues and expenses are considered 'operating' in most
companies, this is a good way to measure a company's profitability.
• Although It is a good starting point for analyzing many companies, there are items
like interest and taxes that are not included in operating income. Therefore, the
operating margin is an imperfect measurement a company's profitability.
Operating margin formula
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/profitability-ratios-39/operating-margin205-
Analyzing Financial Statements > Profitability Ratios
Profit Margin
• Profit margin is the profit divided by revenue.
• There are two types of profit margin: gross profit margin and net profit margin.
• A higher profit margin is better for the company, but there may be strategic
decisions made to lower the profit margin or to even have it be negative.
Net Profit Margin
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/profitability-ratios-39/profit-margin-2061542?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl
Analyzing Financial Statements > Profitability Ratios
Return on Total Assets
• ROA is net income divided by total assets.
• The ROA is the product of two common ratios: profit margin and asset turnover.
• A higher ROA is better, but there is no metric for a good or bad ROA. An ROA
depends on the company, the industry and the economic environment.
• ROA is based on the book value of assets, which can be starkly different from the
market value of assets.
Return on Assets
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/profitability-ratios-39/return-on-totalassets-207-
Analyzing Financial Statements > Profitability Ratios
Basic Earning Power (BEP) Ratio
• The higher the BEP ratio, the more effective a company is at generating income
from its assets.
• Using EBIT instead of operating income means that the ratio considers all income
earned by the company, not just income from operating activity. This gives a more
complete picture of how the company makes money.
• BEP is useful for comparing firms with different tax situations and different
degrees of financial leverage.
Basic Earnings Power Ratio
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/profitability-ratios-39/basic-earningpower-bep-ratio-208-
Analyzing Financial Statements > Profitability Ratios
Return on Common Equity
• ROE is net income divided by total shareholders' equity.
• ROE is also the product of return on assets (ROA) and financial leverage.
• ROE shows how well a company uses investment funds to generate earnings
growth. There is no standard for a good or bad ROE, but a higher ROE is better.
Return on Equity
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/profitability-ratios-39/return-oncommon-equity-209-
Analyzing Financial Statements > Asset Management Ratios
Asset Management Ratios
• Inventory Turnover Ratio
• Days Sales Outstanding
• Fixed Assets Turnover Ratio
• Total Assets Turnover Ratio
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Asset Management Ratios
Inventory Turnover Ratio
• Inventory turnover = Cost of goods sold/Average inventory.
• Average days to sell the inventory = 365 days /Inventory turnover ratio.
• A low turnover rate may point to overstocking, obsolescence, or deficiencies in
the product line or marketing effort.
• Conversely, a high turnover rate may indicate inadequate inventory levels, which
may lead to a loss in business as the inventory is too low.
Inventory
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/asset-management-ratios-40/inventoryturnover-ratio-210-
Analyzing Financial Statements > Asset Management Ratios
Days Sales Outstanding
• Days sales outstanding is a financial ratio that illustrates how well a company's
accounts receivables are being managed.
• DSO ratio = accounts receivable / average sales per day, or DSO ratio =
accounts receivable / (annual sales / 365 days).
• Generally speaking, higher DSO ratio can indicate a customer base with credit
problems and/or a company that is deficient in its collections activity. A low ratio
may indicate the firm's credit policy is too rigorous, which may be hampering
sales.
Days Sales Outstanding
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/asset-management-ratios-40/dayssales-outstanding-211-
Analyzing Financial Statements > Asset Management Ratios
Fixed Assets Turnover Ratio
• Fixed asset turnover = Net sales / Average net fixed assets.
• The higher the ratio, the better, because a high ratio indicates the business has
less money tied up in fixed assets for each unit of currency of sales revenue. A
declining ratio may indicate that the business is over-invested in plant, equipment,
or other fixed assets.
• Fixed assets, also known as a non-current asset or as property, plant, and
equipment (PP&E), is a term used in accounting for assets and property that
cannot easily be converted into cash.
Turn Tables
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/asset-management-ratios-40/fixedassets-turnover-ratio-212-
Analyzing Financial Statements > Asset Management Ratios
Total Assets Turnover Ratio
• Total assets turnover = Net sales revenue / Average total assets.
• Net sales are operating revenues earned by a company for selling its products or
rendering its services.
• Anything tangible or intangible that is capable of being owned or controlled to
produce value and that is held to have positive economic value is considered an
asset.
• Companies with low profit margins tend to have high asset turnover, while those
with high profit margins have low asset turnover.
Assets
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/asset-management-ratios-40/totalassets-turnover-ratio-213-
Analyzing Financial Statements > Liquidity Ratios
Liquidity Ratios
• Current Ratio
• Quick Ratio (Acid-Test Ratio)
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Liquidity Ratios
Current Ratio
• The liquidity ratio expresses a company's ability to repay short-term creditors out
of its total cash. The liquidity ratio is the result of dividing the total cash by shortterm borrowings.
• The current ratio is a financial ratio that measures whether or not a firm has
enough resources to pay its debts over the next 12 months.
• Current ratio = current assets / current liabilities.
• Acceptable current ratios vary from industry to industry and are generally between
1.5 and 3 for healthy businesses.
Liquidity
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/liquidity-ratios-41/current-ratio-2146599?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl
Analyzing Financial Statements > Liquidity Ratios
Quick Ratio (Acid-Test Ratio)
• Quick Ratio = (Cash and cash equivalent + Marketable securities + Accounts
receivable) / Current liabilities.
• Acid Test Ratio = (Current assets - Inventory) / Current liabilities.
• Ideally, the acid test ratio should be 1:1 or higher, however this varies widely by
industry. In general, the higher the ratio, the greater the company's liquidity.
Cash
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/liquidity-ratios-41/quick-ratio-acid-testratio-215-
Analyzing Financial Statements > Debt Management Ratios
Debt Management Ratios
• Total Debt to Total Assets
• Times-Interest-Earned Ratio
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Debt Management Ratios
Total Debt to Total Assets
• The debt ratio measures the firm's ability to repay long-term debt by indicating the
percentage of a company's assets that are provided via debt.
• Debt ratio = Total debt / Total assets.
• The higher the ratio, the greater risk will be associated with the firm's operation.
Debt
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/debt-management-ratios-42/total-debtto-total-assets-216-
Analyzing Financial Statements > Debt Management Ratios
Times-Interest-Earned Ratio
• Times interest earned (TIE) or Interest Coverage ratio is a measure of a
company's ability to honor its debt payments. It may be calculated as either EBIT
or EBITDA divided by the total interest payable.
• Interest Charges = Traditionally "charges" refers to interest expense found on the
income statement.
• EBIT = Revenue – Operating expenses (OPEX) + Non-operating income.
• EBITDA = Earnings before interest, taxes, depreciation and amortization.
• Times Interest Earned or Interest Coverage is a great tool when measuring a
company's ability to meet its debt obligations.
Interest
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/debt-management-ratios-42/timesinterest-earned-ratio-217-
Analyzing Financial Statements > Market Value Ratios
Market Value Ratios
• Price/Earnings Ratio
• Market/Book Ratio
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Market Value Ratios
Price/Earnings Ratio
• P/E ratio = Market price per share / Annual earnings per share.
• The P/E ratio is a widely used valuation multiple used as a guide to the relative
values of companies; for example, a higher P/E ratio means that investors are
paying more for each unit of current net income, so the stock is more expensive
than one with a lower P/E ratio.
• Different types of P/E include: trailing P/E or P/E ttm, trailing P/E from continued
operations, and forward P/E or P/Ef.
Two-way Communication
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/market-value-ratios-43/price-earningsratio-218-
Analyzing Financial Statements > Market Value Ratios
Market/Book Ratio
• The calculation can be performed in two ways: 1) the company's market
capitalization can be divided by the company's total book value from its balance
sheet, 2) using per-share values, is to divide the company's current share price by
the book value per share.
• A higher P/B ratio implies that investors expect management to create more value
from a given set of assets, all else equal.
• Technically, P/B can be calculated either including or excluding intangible assets
and goodwill.
S&P P/B ratio
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/market-value-ratios-43/market-bookratio-219-
Analyzing Financial Statements > The DuPont Equation, ROE, ROA, and Growth
The DuPont Equation, ROE, ROA, and Growth
• The DuPont Equation
• ROE and Potential Limitations
• Assessing Internal Growth and Sustainability
• Dividend Payments and Earnings Retention
• Relationships between ROA, ROE, and Growth
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > The DuPont Equation, ROE, ROA, and Growth
The DuPont Equation
• By splitting ROE into three parts, companies can more easily understand changes
in their returns on equity over time.
• As profit margin increases, every sale will bring more money to a company's
bottom line, resulting in a higher overall return on equity.
• As asset turnover increases, a company will generate more sales per asset
owned, resulting in a higher overall return on equity.
• Increased financial leverage will also lead to an increase in return on equity, since
using more debt financing brings on higher interest payments, which are tax
deductible.
DuPont Model
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/the-dupont-equation-roe-roa-andgrowth-44/the-dupont-equation-220-
Analyzing Financial Statements > The DuPont Equation, ROE, ROA, and Growth
ROE and Potential Limitations
• Return on equity is an indication of how well a company uses investment funds to
generate earnings growth.
• Returns on equity between 15% and 20% are generally considered to be
acceptable.
• Return on equity is equal to net income (after preferred stock dividends but before
common stock dividends) divided by total shareholder equity (excluding preferred
shares).
• Stock prices are most strongly determined by earnings per share (EPS) as
opposed to return on equity.
Return On Equity
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/the-dupont-equation-roe-roa-andgrowth-44/roe-and-potential-limitations-221-
Analyzing Financial Statements > The DuPont Equation, ROE, ROA, and Growth
Assessing Internal Growth and Sustainability
• The internal growth rate is a formula for calculating the maximum growth rate a
firm can achieve without resorting to external financing.
• Sustainable growth is defined as the annual percentage of increase in sales that
is consistent with a defined financial policy.
• Another measure of growth, the optimal growth rate, assesses sustainable growth
from a total shareholder return creation and profitability perspective, independent
of a given financial strategy.
Revenue Growth and Profitability
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/the-dupont-equation-roe-roa-andgrowth-44/assessing-internal-growth-and-sustainability-222-
Analyzing Financial Statements > The DuPont Equation, ROE, ROA, and Growth
Dividend Payments and Earnings Retention
• Many corporations retain a portion of their earnings and pay the remainder as a
dividend.
• Dividends are usually paid in the form of cash, store credits, or shares in the
company.
• Cash dividends are a form of investment income and are usually taxable to the
recipient in the year that they are paid.
• Dividend payout ratio is the fraction of net income a firm pays to its stockholders
in dividends.
• Retained earnings can be expressed in the retention ratio.
Example Balance Sheet
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/the-dupont-equation-roe-roa-andgrowth-44/dividend-payments-and-earnings-retention-223-
Analyzing Financial Statements > The DuPont Equation, ROE, ROA, and Growth
Relationships between ROA, ROE, and Growth
• Return on equity measures the rate of return on the shareholders' equity of
common stockholders.
• Return on assets shows how profitable a company's assets are in generating
revenue.
• In other words, return on assets makes up two-thirds of the DuPont equation
measuring return on equity.
• Capital intensity is the term for the amount of fixed or real capital present in
relation to other factors of production. Rising capital intensity pushes up the
productivity of labor.
Return On Assets
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/the-dupont-equation-roe-roa-andgrowth-44/relationships-between-roa-roe-and-growth-224-
Analyzing Financial Statements > Using Financial Ratios for Analysis
Using Financial Ratios for Analysis
• Evaluating Financial Statements
• Industry Comparisons
• Benchmarking
• Trend Analysis
• Limitations of Financial Statement Analysis
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Using Financial Ratios for Analysis
Evaluating Financial Statements
• Ratio analysis is a tool for evaluating financial statements but also relies on the
numbers in the reported financial statements being put into order to be used for
comparison. With a few exceptions, the majority of the data used in ratio analysis
comes from the financial statements.
• Prior to the calculation of financial ratios, reported financial statements are often
reformulated and adjusted by analysts to make the financial ratios more
meaningful as comparisons across time or across companies.
• In terms of reformulation, earnings might be separated into recurring and nonrecurring items. In terms of adjustment of financial statements, analysts may
adjust earnings numbers up or down when they suspect the reported data is
Putting Numbers in Order
View on Boundless.com
inaccurate due to issues like earnings management.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/using-financial-ratios-for-analysis45/evaluating-financial-statements-225-
Analyzing Financial Statements > Using Financial Ratios for Analysis
Industry Comparisons
• One of the advantages of ratio analysis is that it allows comparison across
companies. However, while ratios can be quite helpful in comparing companies
within an industry and even across some similar industries, cross-industry
comparisons may not be helpful and should be done with caution.
• An industry represents a classification of companies by economic activity, but
"industry" can be too broad or narrow a definition for ratio analysis comparison.
When comparing ratios, companies should be comparable in terms of having
similar characteristics in the statistics being analyzed.
• Valuation using multiples only reveals patterns in relative values. For multiples to
be useful, the statistic involved must bear a logical, meaningful relationship to the
Industry
View on Boundless.com
market value observed, which is something that can vary across industry.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/using-financial-ratios-for-analysis45/industry-comparisons-226-
Analyzing Financial Statements > Using Financial Ratios for Analysis
Benchmarking
• Financial ratios allow for comparisons and, therefore, are intertwined with the
process of benchmarking, comparing one's business to that of relevant others or
of the same company at a different point in time processes on a specific indicator
or series of indicators.
• Benchmarking can be done in many ways and ratio analysis is only one of these.
One benefit of ratio analysis as a component of benchmarking is that many
financial ratios are well-established calculations derived from verified data.
• Benchmarking using ratio analysis can be useful to various audiences; for
example, investors and managers interested in incorporate quantitative
comparisons of a company to peers.
Benchmarking Measures Performance
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/using-financial-ratios-for-analysis45/benchmarking-227-
Analyzing Financial Statements > Using Financial Ratios for Analysis
Trend Analysis
• Trend analysis is the practice of collecting information and attempting to spot a
pattern or trend in the same metric historically, either by examining it in tables or
charts. Often this trend analysis is used to predict or inform decisions around
future events.
• Trend analysis can be performed in different ways in finance. Fundamental
analysis relies on historical financial statement analysis, often in the form of ratio
analysis.
• Trend analysis using financial ratios can be complicated by changes to
companies and accounting over time. For example, a company may change its
business model and begin to operate in a new industry or it may change the end
Trend Analysis
View on Boundless.com
of its financial year or the way it accounts for inventories.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/using-financial-ratios-for-analysis45/trend-analysis-228-
Analyzing Financial Statements > Using Financial Ratios for Analysis
Limitations of Financial Statement Analysis
• Ratio analysis is hampered by potential limitations with accounting and the data in
the financial statements themselves. This can include errors as well as accounting
mismanagement, which involves distorting the raw data used to derive financial
ratios.
• Proponents of the stronger forms of the efficient-market hypothesis, technical
analysts, and behavioral economists argue that fundamental analysis is limited as
a stock valuation tool, all for their own distinct reasons.
• Ratio analysis can also omit important aspects of a firm's success, such as key
intangibles, like brand, relationships, skills and culture. These are primary drivers
of success over the longer term even though they are absent from conventional
View on Boundless.com
financial statements.
• Other disadvantages of this type of analysis is that if used alone it can present an
overly simplistic view of the company by distilling a great deal of information into a
single number or series of numbers that may not provide adequate context or be
comparable across time or industry.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/using-financial-ratios-for-analysis45/limitations-of-financial-statement-analysis-229-
Analyzing Financial Statements > Considering Inflation's Distortionary Effects
Considering Inflation's Distortionary Effects
• Impact of Inflation on Financial Statement Analysis
• Disinflation
• Deflation
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Considering Inflation's Distortionary Effects
Impact of Inflation on Financial Statement Analysis
• Many of the historical numbers appearing on financial statements are not
economically relevant because prices have changed since they were incurred.
• Since the numbers on financial statements represent dollars expended at different
points of time and, in turn, embody different amounts of purchasing power, they
are simply not additive.
• Reported profits may exceed the earnings that could be distributed to
shareholders without impairing the company's ongoing operations.
• Future earnings are not easily projected from historical earnings. Future capital
needs are difficult to forecast and may lead to increased leverage, which
Hyperinflation Graph
increases the risk to the business.
View on Boundless.com
• The asset values for inventory, equipment and plant do not reflect their economic
value to the business.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/considering-inflation-s-distortionaryeffects-46/impact-of-inflation-on-financial-statement-analysis-230-
Analyzing Financial Statements > Considering Inflation's Distortionary Effects
Disinflation
• Disinflation occurs when the increase in the "consumer price level" slows down
from the previous period when the prices were rising. Disinflation is the reduction
in the general price level in the economy but for a very short period of time.
• The causes of disinflation may be a decrease in the growth rate of the money
supply. If the central bank of a country enacts tighter monetary policy, the supply
of money reduces, and money becomes more upscale and the demand for money
remains constant.
• Disinflation may result from a recession. The central bank adopts contractionary
monetary policy, goods, and services are more expensive. Even though the
demand for commodities fall, the supply still remains unaltered.Thus, the prices
Disinflation
View on Boundless.com
would fall over a period of time leading to disinflation.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/considering-inflation-s-distortionaryeffects-46/disinflation-231-
Analyzing Financial Statements > Considering Inflation's Distortionary Effects
Deflation
• In the IS/LM model (Investment and Saving equilibrium/ Liquidity Preference and
Money Supply equilibrium model), deflation is caused by a shift in the supply-anddemand curve for goods and services, particularly a fall in the aggregate level of
demand.
• In more recent economic thinking, deflation is related to risk: where the riskadjusted return on assets drops to negative, investors and buyers will hoard
currency rather than invest it. This can produce a liquidity trap.
• In monetarist theory, deflation must be associated with either a reduction in the
money supply, a reduction in the velocity of money or an increase in the number
of transactions. But any of these may occur separately without deflation.
US historical inflation rates
View on Boundless.com
• In mainstream economics, deflation may be caused by a combination of the
supply and demand for goods and the supply and demand for money; specifically
the supply of money going down and the supply of goods going up.
• The effects of deflation are: decreasing nominal prices for goods and services,
increasing buying power of cash money and all assets denominated in cash
terms, possibly decreasing investment and lending if cash holdings are seen as
preferable, and benefiting recipients of fixed incomes.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/considering-inflation-s-distortionaryeffects-46/deflation-232-
Analyzing Financial Statements > Other Distortions
Other Distortions
• Discrepancies
• Extraordinary Gains and Losses
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium
=direct&utm_source=boundless
Analyzing Financial Statements > Other Distortions
Discrepancies
• At the end of each month when you get your bank or credit card statement, you
will need to reconcile each account in your accounting program against the
statement.
• You will want to double check that you entered the correct starting and ending
balances for the account, and if you did, go back through all the transactions until
you find the problem. Then correct it and you can proceed with your reconciliation.
• In accounting, reconciliation refers to a process that compares two sets of records
(usually the balances of two accounts) to make sure they are in agreement.
• It depends on the type of discrepancies, most accounting discrepancies are due
to the lack of accuracy (decimal places) when breaking down a large figure.
Reconciliation of discrepancies
View on Boundless.com
Although more decimal places in your calculations can help solve discrepancies it
can look rather unsightly on a report.
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/other-distortions-47/discrepancies-2333896?campaign_content=book_192_chapter_3&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl
Analyzing Financial Statements > Other Distortions
Extraordinary Gains and Losses
• Extra gains or losses are nonrecurring, onetime, unusual, non-operating gains or
losses that are recorded by a business during the period.
• No items may be presented in the income statement as extraordinary items under
IFRS regulations, but are permissible under US GAAP. (IAS 1.87) The amount of
each of these gains or losses, net of the income tax effect, is reported separately
in the income statement.
• Examples of extraordinary items are casualty losses, losses from expropriation of
assets by a foreign government, gain on life insurance, gain or loss on the early
extinguishment of debt, gain on troubled debt restructuring, and write-off of an
intangible asset.
Income statement in accordance with IFRS
View on Boundless.com
Free to share, print, make copies and changes. Get yours at www.boundless.com
www.www/boundless.com/finance/textbooks/boundless-finance-textbook/analyzing-financial-statements-3/other-distortions-47/extraordinarygains-and-losses-234-
Appendix
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Key terms
• asset Something or someone of any value; any portion of one's property or effects so considered.
• asset Something or someone of any value; any portion of one's property or effects so considered.
• average collection period 365 divided by the receivables turnover ratio
• balance sheet A summary of a person's or organization's assets, liabilities and equity as of a specific date.
• benchmark A standard by which something is evaluated or measured.
• business cycle The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or economic
activity over several months or years.
• business cycle A long-term fluctuation in economic activity between growth and recession.
• competitive advantage something that places a company or a person above the competition
• current ratio current assets divided by current liabilities
• days in inventory the average value of inventory divided by the average cost of goods sold per day
• debt to total assets ratio after tax income divided by liabilities
• deflationary spiral A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to
lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation,
a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• earnings management A euphemism, such as creative accounting, to refer to fraudulent accounting practices that manipulate
reporting of income, assets or liabilities with the intent to influence interpretations of the income statements.
• EBIT Earnings before interest and taxes. A measure of a business's profitability.
• equity Ownership, especially in terms of net monetary value, of a business.
• equity Ownership, especially in terms of net monetary value, of a business.
• extraordinary items unusual (abnormal) and infrequent things that impact the company
• Financial Accounting Standards Board private, not-for-profit organization whose primary purpose is to develop generally
accepted accounting principles (GAAP) within the United States in the public's interest
• forecast An estimation of a future condition.
• fundamental analysis An analysis of a business with the goal of financial projections in terms of income statement, financial
statements and health, management and competitive advantages, and competitors and markets.
• goodwill Goodwill is an accounting concept meaning the value of an asset owned that is intangible but has a quantifiable
"prudent value" in a business for example a reputation the firm enjoyed with its clients.
• gross profit The difference between net sales and the cost of goods sold.
• historical cost basis Under this type of accounting, assets and liabilities are recorded at their values when first acquired. They
are not then generally restated for changes in values. Costs recorded in the Income Statement are based on the historical cost
of items sold or used, rather than their replacement costs.
• holding cost In business management, holding cost is money spent to keep and maintain a stock of goods in storage.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• hyperinflation In economics, this occurs when a country experiences very high, accelerating, and perceptibly "unstoppable"
rates of inflation. In such a condition, the general price level within an economy rapidly increases as the currency quickly loses
real value.
• IAS International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that
company accounts are understandable and comparable across international boundaries.
• inflation An increase in the general level of prices or in the cost of living.
• intangible asset Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched, or physically
measured, and are created through time and effort, and are identifiable as a separate asset.
• liquidity Availability of cash over short term: ability to service short-term debt.
• liquidity trap A liquidity trap is a situation in which injections of cash into the private banking system by a central bank fail to
lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because
they expect an adverse event such as deflation, insufficient aggregate demand, or war.
• metric A measure for something; a means of deriving a quantitative measurement or approximation for otherwise qualitative
phenomena.
• net income Gross profit minus operating expenses and taxes.
• net profit The gross revenue minus all expenses.
• non-operating Non-operating in accounting and finance is not related to the typical activities of the business or organization.
• Non-operating income Non-operating income, in accounting and finance, is gains or losses from sources not related to the
typical activities of the business or organization. Non-operating income can include gains or losses from investments, property
or asset sales, currency exchange, and other atypical gains or losses.
• operating income Revenue - operating expenses. (Does not include other expenses such as taxes and depreciation).
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• outstanding check a check that has been written but has not yet been deposited in the receiver's bank account
• outstanding shares Shares outstanding are all the shares of a corporation that have been authorized, issued and purchased by
investors and are held by them.
• profit margins Profit margin, net margin, net profit margin or net profit ratio all refer to a measure of profitability. It is calculated
by finding the net profit as a percentage of the revenue.
• quantitatively With respect to quantity rather than quality.
• ratio A number representing a comparison between two things.
• ratio A number representing a comparison between two things.
• ratio analysis the use of quantitative techniques on values taken from an enterprise's financial statements
• recession A period of reduced economic activity.
• reconciliation Process of matching and comparing figures from accounting records against those presented on a bank
statement.
• retention The act of retaining; something retained
• retention ratio retained earnings divided by net income
• Return on Assets A measure of a company's profitability. Calculated by dividing the net income for an accounting period by the
average of the total assets the business held during that same period.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• return on common stockholders' equity a fiscal year's net income (after preferred stock dividends but before common stock
dividends) divided by total equity (excluding preferred shares), expressed as a percentage
• sentiment A general thought, feeling, or sense.
• shareholder One who owns shares of stock.
• stock split To issue a higher number of new shares to replace old shares. This effectively increases the number of shares
outstanding without changing the market capitalization of the company.
• sustainable growth rate the optimal growth from a financial perspective assuming a given strategy with clear defined financial
frame conditions/ limitations
• time value of money The value of money, figuring in a given amount of interest, earned over a given amount of time.
• Treasury bills Treasury bills (or T-Bills) mature in one year or less. Like zero-coupon bonds, they do not pay interest prior to
maturity; instead they are sold at a discount of the par value to create a positive yield to maturity.
• valuation The process of estimating the market value of a financial asset or liability.
• valuation The process of estimating the market value of a financial asset or liability.
• valuation The process of estimating the market value of a financial asset or liability.
• working capital management Decisions relating to working capital and short term financing are referred to as working capital
management [19]. These involve managing the relationship between a firm's short-term assets and its short-term liabilities.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Return on Assets
The return on assets ratio is net income divided by total assets. That can then be broken down into the product of profit margins and asset turnover.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Return on assets Du Pont." GNU FDL http://en.wikipedia.org/wiki/Return_on_assets_Du_Pont View on Boundless.com
Analyzing Financial Statements
ROE Broken Down
This is an expression of return on equity decomposed into its various factors.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "DuPont analysis." GNU FDL http://en.wikipedia.org/wiki/DuPont_analysis View on Boundless.com
Analyzing Financial Statements
Assets
Asset turnover measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "Flickr Search: asset%20turnover." CC BY http://www.flickr.com/search/?q=asset%2520turnover View on Boundless.com
Analyzing Financial Statements
Two-way Communication
Free to share, print, make copies and changes. Get yours at www.boundless.com
Static Flckr. CC BY-SA http://farm5.staticflickr.com/4081/4773103417_9da269f647_o.jpg View on Boundless.com
Analyzing Financial Statements
Basic Earnings Power Ratio
BEP is calculated as the ratio of Earnings Before Interest and Taxes to Total Assets.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Financial ratio." GNU FDL http://en.wikipedia.org/wiki/Financial_ratio View on Boundless.com
Analyzing Financial Statements
Earnings Per Share
EPS is equal to profit divided by the weighted average of common shares.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Earnings per share." GNU FDL http://en.wikipedia.org/wiki/Earnings_per_share View on Boundless.com
Analyzing Financial Statements
Putting Numbers in Order
Evaluating financial statements involves getting the numbers in order and then using these figures to perform ratio analysis.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikimedia. "1952-1979 М р т з п в." CC BY http://commons.wikimedia.org/wiki/File:19521979_%25D0%259C%25D0%25B0%25D0%25BB%25D1%2582%25D0%25B5%25D1%2588%25D0%25BA%25D0%25B0_%25D1%2580%25D0%25B5%25D0
Analyzing Financial Statements
Operating margin formula
The operating margin is found by dividing net operating income by total revenue.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Operating margin." GNU FDL http://en.wikipedia.org/wiki/Operating_margin View on Boundless.com
Analyzing Financial Statements
Benchmarking Measures Performance
Results are the paramount concern to a transactional leader.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikimedia. "Performance ratings." CC BY-SA http://commons.wikimedia.org/wiki/File:Performance_ratings.png View on Boundless.com
Analyzing Financial Statements
Turn Tables
Turn tables should help you remember turnover. Fixed-asset turnover indicates how well the business is using its fixed assets to generate sales.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | Turn Tables | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/peterhess/2386274743/sizes/m/in/photostream/ View on
Boundless.com
Analyzing Financial Statements
Hyperinflation Graph
German Hyperinflation Data
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "German Hyperinflation." CC BY-SA http://en.wikipedia.org/wiki/File:German_Hyperinflation.jpg View on Boundless.com
Analyzing Financial Statements
Income statement in accordance with IFRS
This income statement is a very brief example prepared in accordance with IFRS; no extraordinary items are presented.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Income statement." GNU FDL http://en.wikipedia.org/wiki/Income_statement#Irregular_items View on Boundless.com
Analyzing Financial Statements
Return on Equity
The return on equity is a ratio of net income to equity. It is a measure of how effective the equity is at generating income.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Return on assets Du Pont." GNU FDL http://en.wikipedia.org/wiki/Return_on_assets_Du_Pont View on Boundless.com
Analyzing Financial Statements
Dividend Payout Ratio
The dividend payout ratio is equal to dividend payments divided by net income for the same period.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Dividend payout ratio." GNU FDL http://en.wikipedia.org/wiki/Dividend_payout_ratio View on Boundless.com
Analyzing Financial Statements
Cash
Cash is the most liquid asset in a business.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | cash money | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/22344831@N04/3141765730/sizes/m/in/photostream/ View on
Boundless.com
Analyzing Financial Statements
Gross Profit Margin
The percentage of gross profit earned on the company's sales.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikibooks. "GCSE Business Studies/Ratio Analysis." CC BY-SA 3.0 http://en.wikibooks.org/wiki/GCSE_Business_Studies/Ratio_Analysis View on Boundless.com
Analyzing Financial Statements
Debt
Debt ratio is an index of a business operation.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | Wipe our Debt | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/59937401@N07/7214450550/sizes/m/in/photostream/ View on
Boundless.com
Analyzing Financial Statements
Trend Analysis
Determining the popularity and demand for specific subject over time through trend analysis.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikimedia. CC BY-SA http://upload.wikimedia.org/wikipedia/commons/3/39/WikiProject_Trend_analysis_topic_oriented_creation_trends.png View on
Boundless.com
Analyzing Financial Statements
S&P P/B ratio
A higher P/B ratio implies that investors expect management to create more value.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Google. "Google Image Result for http://www.howprofit.com/wp-content/uploads/2011/09/SP500-PB-Ratio-1981-2010.jpg." CC BY
http://www.google.com/imgres?hl=en&authuser=0&biw=1280&bih=595&tbm=isch&tbnid=kW_oDFSDKU0FrM:&imgrefurl=http://www.howprofit.com/investment-
Analyzing Financial Statements
Balance sheet
Balance sheet shows financial position of a company.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Google. "Google Image Result for." CC BY
http://www.google.com/imgres?q=balance+sheet&hl=en&biw=1275&bih=639&tbs=sur:fmc&tbm=isch&imgrefurl=http://yell0brickrd.blogspot.com/2011/03/balance-
Analyzing Financial Statements
Disinflation
Disinflation is a decrease in the rate of inflation as illustrated in the yellow region of this graph.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Disinflation graph." CC BY-SA http://en.wikipedia.org/wiki/File:Disinflation_graph.png View on Boundless.com
Analyzing Financial Statements
Reconciliation of discrepancies
Bank reconciliation statement
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Bank reconciliation." GNU FDL http://en.wikipedia.org/wiki/Bank_reconciliation View on Boundless.com
Analyzing Financial Statements
Return On Assets
Return on assets is equal to net income divided by total assets.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Return on assets." GNU FDL http://en.wikipedia.org/wiki/Return_on_assets View on Boundless.com
Analyzing Financial Statements
Business analysis and profitability
Financial ratio analysis allows an observer to put the data provided by a company in context. This allows the observer to gauge the strength of different
aspects of the company's operations.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Pixabay. "Achievement, Bar, Business, Chart - Free image - 18134." Public domain http://pixabay.com/en/achievement-bar-business-chart-18134/ View on
Boundless.com
Analyzing Financial Statements
Income statement
GAAP and IRS accounting can differ.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | y2cary3n6mng-5ha51l-income-statement-example | Flickr - Photo Sharing!." CC BY
http://www.flickr.com/photos/sampjb/7690678408/sizes/m/in/photostream/ View on Boundless.com
Analyzing Financial Statements
Revenue Growth and Profitability
ROA, ROS and ROE tend to rise with revenue growth to a certain extent.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Sustainable growth rate." GNU FDL http://en.wikipedia.org/wiki/Sustainable_growth_rate View on Boundless.com
Analyzing Financial Statements
Return On Equity
ROE is equal to after-tax net income divided by total shareholder equity.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Return on equity." GNU FDL http://en.wikipedia.org/wiki/Return_on_equity View on Boundless.com
Analyzing Financial Statements
The DuPont Equation
In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Return on equity." GNU FDL http://en.wikipedia.org/wiki/Return_on_equity View on Boundless.com
Analyzing Financial Statements
Inventory
A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | June 8-14, 2011 | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/osseous/5903703724/sizes/m/in/photostream/ View on
Boundless.com
Analyzing Financial Statements
Example Balance Sheet
Retained earnings can be found on the balance sheet, under the owners' (or shareholders') equity section.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | y2cary3n6mng-q6hnvf-balance-sheet | Flickr - Photo Sharing!." CC BY-SA
http://www.flickr.com/photos/sampjb/7690684984/sizes/m/in/photostream/ View on Boundless.com
Analyzing Financial Statements
Price to Earnings Ratio
P/E ratio = market price per share/ annual earning per share
Free to share, print, make copies and changes. Get yours at www.boundless.com
Google. "Google Image Result for http://stocksonwallstreet.net/wp-content/uploads/2011/01/06-11-price-to-earnings-ratio-p-e.jpg." CC BY
http://www.google.com/imgres?num=10&hl=en&authuser=0&biw=1280&bih=595&tbm=isch&tbnid=VPeRbIXB3TmcYM:&imgrefurl=http://stocksonwallstreet.net/tag/
Analyzing Financial Statements
Days Sales Outstanding
A low ratio may indicate the firm's credit policy is too rigorous, which may be hampering sales.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Google. "Google Images." CC BY
http://www.google.com/imgres?q=sales&hl=en&biw=1275&bih=595&tbs=sur:fmc&tbm=isch&imgrefurl=http://www.insidesales.com/insider/dialer/cut-lead-costs-in-
Analyzing Financial Statements
DuPont Model
A flow chart representation of the DuPont Model.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "File:DuPontModelEng.svg - Wikipedia, the free encyclopedia." CC0 1.0 Universal
http://en.wikipedia.org/w/index.php?title=File:DuPontModelEng.svg&page=1 View on Boundless.com
Analyzing Financial Statements
Industry
Comparing ratios of companies within an industry can allow an analyst to make like to like (apples to apples) comparisons. Comparisons across
industries may be like to unlike (apples to oranges) comparisons, and thus less useful.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikimedia. "Steenfabriek, Tolkamer, Netherlands." CC BY-SA http://commons.wikimedia.org/wiki/File:Steenfabriek,_Tolkamer,_Netherlands.jpg View on
Boundless.com
Analyzing Financial Statements
Interest
Interest rates of working capital financing can be largely affected by discount rate, WACC and cost of capital.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | Interest Rates | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/68751915@N05/6870875029/sizes/m/in/photostream/ View on
Boundless.com
Analyzing Financial Statements
Liquidity
High liquidity means a company has the ability to meet its short-term obligations.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Flickr. "All sizes | money making strategy | Flickr - Photo Sharing!." CC BY http://www.flickr.com/photos/40989691@N08/5246534468/sizes/s/in/photostream/ View
on Boundless.com
Analyzing Financial Statements
Net Profit Margin
The percentage of net profit (gross profit minus all other expenses) earned on a company's sales.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikibooks. "GCSE Business Studies/Ratio Analysis." CC BY-SA 3.0 http://en.wikibooks.org/wiki/GCSE_Business_Studies/Ratio_Analysis View on Boundless.com
Analyzing Financial Statements
US historical inflation rates
Annual inflation (in blue) and deflation (in green) rates in the United States from 1666 to 2004
Free to share, print, make copies and changes. Get yours at www.boundless.com
Wikipedia. "Deflation." GNU FDL http://en.wikipedia.org/wiki/Deflation View on Boundless.com
Analyzing Financial Statements
Which of the following statements regarding balance sheets is
true?
A) A balance sheet covers a period of time.
B) Balance sheet account names and usage are up to the company
producing the report.
C) All of these answers.
D) The balance sheet's sections are assets, liabilities, and ownership
equity.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following statements regarding balance sheets is
true?
A) A balance sheet covers a period of time.
B) Balance sheet account names and usage are up to the company
producing the report.
C) All of these answers.
D) The balance sheet's sections are assets, liabilities, and ownership
equity.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is a correct statement regarding a method
of drafting a company's income statement?
A) All of these answers.
B) The single-step method requires totaling a company's revenue, then
subtracting all of its costs.
C) The multi-step method requires calculating the gross profit then
subtracting operating expenses.
D) The non-operating section of the multi-step method covers all nonprimary revenues and losses.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is a correct statement regarding a method
of drafting a company's income statement?
A) All of these answers.
B) The single-step method requires totaling a company's revenue, then
subtracting all of its costs.
C) The multi-step method requires calculating the gross profit then
subtracting operating expenses.
D) The non-operating section of the multi-step method covers all nonprimary revenues and losses.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is NOT a correct definition of a basic type
of financial ratios?
A) Liquidity ratios measure the availability of cash to pay debt.
B) Activity ratios are concerned with shareholder audiences.
C) Debt ratios measure the firm's ability to pay long-term debt.
D) Profitability ratios measure the firm's use of its assets to generate an
acceptable rate of return.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is NOT a correct definition of a basic type
of financial ratios?
A) Liquidity ratios measure the availability of cash to pay debt.
B) Activity ratios are concerned with shareholder audiences.
C) Debt ratios measure the firm's ability to pay long-term debt.
D) Profitability ratios measure the firm's use of its assets to generate an
acceptable rate of return.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
During a fiscal year, a company has $20,000,000 in revenue. Its
operating expenses are $17,000,000. What is the company's
operating margin?
A) 0.15
B) 0.85
C) .73
D) .13
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
During a fiscal year, a company has $20,000,000 in revenue. Its
operating expenses are $17,000,000. What is the company's
operating margin?
A) 0.15
B) 0.85
C) .73
D) .13
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
During a fiscal year, a company had $25,000,000 in total sales. It
had a cost of goods sold (COGS) of $18,000,000 and $4,000,000
in additional expenses. What is the company's gross profit
margin?
A) 12%
B) 28%
C) 16%
D) 33.33%
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
During a fiscal year, a company had $25,000,000 in total sales. It
had a cost of goods sold (COGS) of $18,000,000 and $4,000,000
in additional expenses. What is the company's gross profit
margin?
A) 12%
B) 28%
C) 16%
D) 33.33%
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company had $5,000,000 in total revenues for its fiscal year. Its
expenses for the year were $3,500,000. Its total assets were
$12,500,000. What is the company's return on assets for the fiscal
year?
A) 0.40
B) 0.28
C) 0.12
D) 0.70
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company had $5,000,000 in total revenues for its fiscal year. Its
expenses for the year were $3,500,000. Its total assets were
$12,500,000. What is the company's return on assets for the fiscal
year?
A) 0.40
B) 0.28
C) 0.12
D) 0.70
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
At the end of a fiscal year, a company had $8,000,000 in
revenues, $6,000,000 in operating expenses and $500,000 in
non-operating revenue. Its total assets at the end of the year was
$15,000,000. What is its Basic Earning Power ratio?
A) 0.1333
B) 0.1667
C) 0.5667
D) 1.667
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
At the end of a fiscal year, a company had $8,000,000 in
revenues, $6,000,000 in operating expenses and $500,000 in
non-operating revenue. Its total assets at the end of the year was
$15,000,000. What is its Basic Earning Power ratio?
A) 0.1333
B) 0.1667
C) 0.5667
D) 1.667
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company has assets of $2,000,000, net sales of $3,000,000,
and $1,500,000 in equity. Its net income is $10,000,000. What is
its return on equity?
A) 6.667
B) .15
C) 3.333
D) 5
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company has assets of $2,000,000, net sales of $3,000,000,
and $1,500,000 in equity. Its net income is $10,000,000. What is
its return on equity?
A) 6.667
B) .15
C) 3.333
D) 5
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A business begins its fiscal year with an inventory balance of
$1,000,000. During that year its cost of goods sold is $3,500,000.
Its inventory balance at the end of the year is $500,000. What is
its inventory turnover for the year?
A) 4.67
B) 0.21
C) 78.16
D) 0.12
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A business begins its fiscal year with an inventory balance of
$1,000,000. During that year its cost of goods sold is $3,500,000.
Its inventory balance at the end of the year is $500,000. What is
its inventory turnover for the year?
A) 4.67
B) 0.21
C) 78.16
D) 0.12
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A business has $1,250,000 in accounts receivable. Its annual
sales for the fiscal year is $30,000,000. What is its days sales
outstanding ratio?
A) 15.208
B) 0.041
C) 8760
D) 24
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A business has $1,250,000 in accounts receivable. Its annual
sales for the fiscal year is $30,000,000. What is its days sales
outstanding ratio?
A) 15.208
B) 0.041
C) 8760
D) 24
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
At the beginning of a fiscal year, a company has $1,000,000 in
fixed assets. During that year, it makes $8,000,000 in net sales. At
the end of the fiscal year it has $1,500,000 in fixed assets. What
is its fixed-asset turnover ratio?:
A) .15625
B) 6.4
C) 8
D) 5.333
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
At the beginning of a fiscal year, a company has $1,000,000 in
fixed assets. During that year, it makes $8,000,000 in net sales. At
the end of the fiscal year it has $1,500,000 in fixed assets. What
is its fixed-asset turnover ratio?:
A) .15625
B) 6.4
C) 8
D) 5.333
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A business begins its fiscal year with $10,000,000 in total assets.
During the year it has net sales revenue of $45,000,000. At the
end of the year it has $8,000,000 in total assets. What is its total
assets turnover ratio?
A) 4.5
B) 5.62518
C) 5
D) 2.5
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A business begins its fiscal year with $10,000,000 in total assets.
During the year it has net sales revenue of $45,000,000. At the
end of the year it has $8,000,000 in total assets. What is its total
assets turnover ratio?
A) 4.5
B) 5.62518
C) 5
D) 2.5
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company has $100,000 in cash, $300,000 in accounts
receivable, $50,000 in inventory and a $300,000 office building.Its
current liabilities are $250,000.What is the company's current
ratio, and does that ratio good short-term financial strength?
A) The current ratio is 1.8, and the ratio indicates good short-term
financial strength.
B) The current ratio is 1.8, and the ratio indicates poor short-term
financial strength.
C) The current ratio is 3, and the ratio indicates good short-term financial
strength.
D) The current ratio is 3, and the ratio indicates good short-term financial
strength.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company has $100,000 in cash, $300,000 in accounts
receivable, $50,000 in inventory and a $300,000 office building.Its
current liabilities are $250,000.What is the company's current
ratio, and does that ratio good short-term financial strength?
A) The current ratio is 1.8, and the ratio indicates good short-term
financial strength.
B) The current ratio is 1.8, and the ratio indicates poor short-term
financial strength.
C) The current ratio is 3, and the ratio indicates good short-term financial
strength.
D) The current ratio is 3, and the ratio indicates good short-term financial
strength.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company has $450,000 in cash, $300,000 in marketable
securities and $500,000 worth of inventory. Its current assets are
worth $_______,750,000 and its current liabilities are
$_______,250,000. What is the company's acid test ratio?
A) 1.04
B) 1
C) 1.16
D) 0.80
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company has $450,000 in cash, $300,000 in marketable
securities and $500,000 worth of inventory. Its current assets are
worth $_______,750,000 and its current liabilities are
$_______,250,000. What is the company's acid test ratio?
A) 1.04
B) 1
C) 1.16
D) 0.80
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following statements about the total debt to total
assets ratio is NOT true?
A) If a company's debt to asset ratio is less than 0.5, most of its assets
are financed through debt.
B) The debt ratio is calculated by dividing a company's total liability by its
total assets.
C) A highly leveraged company could be in danger if its creditors demand
repayment.
D) The higher the total debt to total asset ratio, the greater the financial
risk.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following statements about the total debt to total
assets ratio is NOT true?
A) If a company's debt to asset ratio is less than 0.5, most of its assets
are financed through debt.
B) The debt ratio is calculated by dividing a company's total liability by its
total assets.
C) A highly leveraged company could be in danger if its creditors demand
repayment.
D) The higher the total debt to total asset ratio, the greater the financial
risk.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company has $1,325,000 in revenue, $1,000,000 in operating
expenses, $25,000 in non-operating income, and $200,000 in
interest charges. What is the company's TIE, and should the
company be concerned about its ability to meet its debt
obligations?
A) Its ratio is 1.75 and it should not be concerned.
B) Its ratio is 6.75 and it should be concerned.
C) Its ratio is 1.75 and it should be concerned.
D) Its ratio is 6.75 and it should not be concerned.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company has $1,325,000 in revenue, $1,000,000 in operating
expenses, $25,000 in non-operating income, and $200,000 in
interest charges. What is the company's TIE, and should the
company be concerned about its ability to meet its debt
obligations?
A) Its ratio is 1.75 and it should not be concerned.
B) Its ratio is 6.75 and it should be concerned.
C) Its ratio is 1.75 and it should be concerned.
D) Its ratio is 6.75 and it should not be concerned.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is NOT a true statement about Price to
Earnings ratios?
A) P/E ratios are useful for comparing companies in the same sector.
B) P/E compares a company's market valuation with the income it is
actually generating.
C) Stocks with higher forecast earnings growth will usually have a lower
P/E.
D) With trailing P/E, the earnings per share is based on the most recent
12 month period.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is NOT a true statement about Price to
Earnings ratios?
A) P/E ratios are useful for comparing companies in the same sector.
B) P/E compares a company's market valuation with the income it is
actually generating.
C) Stocks with higher forecast earnings growth will usually have a lower
P/E.
D) With trailing P/E, the earnings per share is based on the most recent
12 month period.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company has 1 million outstanding shares trading at $12 a
share. Its total assets are $5,000,000 in cash, $2,000,000 in PPE,
$500,000 in inventory, and $5,000,000 in goodwill. What is the
company's tangible per share Price to Book ratio?
A) 0.96
B) 1.60
C) 0.63
D) 2.18
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company has 1 million outstanding shares trading at $12 a
share. Its total assets are $5,000,000 in cash, $2,000,000 in PPE,
$500,000 in inventory, and $5,000,000 in goodwill. What is the
company's tangible per share Price to Book ratio?
A) 0.96
B) 1.60
C) 0.63
D) 2.18
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is NOT a benefit associated with using the
DuPont Equation?
A) The DuPont equation is very useful in analyzing any business
regardless of industry.
B) Analysts can determine which factor is dominant in determining a
company's return on equity.
C) The DuPont equation can show whether a high level of leverage is
risky or necessary for a company.
D) Analysts can use the DuPont equation to understand the fluctuations
of a company's Return on Equity.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is NOT a benefit associated with using the
DuPont Equation?
A) The DuPont equation is very useful in analyzing any business
regardless of industry.
B) Analysts can determine which factor is dominant in determining a
company's return on equity.
C) The DuPont equation can show whether a high level of leverage is
risky or necessary for a company.
D) Analysts can use the DuPont equation to understand the fluctuations
of a company's Return on Equity.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company had $2 million in net income before dividends. It had
$300,000 in preferred stock dividends and $500,000 in common
stock dividends. The company has $1,500,00 in shareholder
equity. What is the company's return on equity?
A) 0.80
B) 1.33
C) 1.13
D) 1.53
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company had $2 million in net income before dividends. It had
$300,000 in preferred stock dividends and $500,000 in common
stock dividends. The company has $1,500,00 in shareholder
equity. What is the company's return on equity?
A) 0.80
B) 1.33
C) 1.13
D) 1.53
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company has $2 million in net income, of which it pays
$500,000 in dividends. At the beginning of the financial year it had
$3 million in assets; at the end of the year it had $5 million in total
assets. What is the company's internal growth rate?
A) 25%
B) -35%
C) 15%
D) -25%
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company has $2 million in net income, of which it pays
$500,000 in dividends. At the beginning of the financial year it had
$3 million in assets; at the end of the year it had $5 million in total
assets. What is the company's internal growth rate?
A) 25%
B) -35%
C) 15%
D) -25%
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A company has net income of $2 million. For the same period it
paid $750,000 in dividends. What is its retention ratio?
A) 0.375
B) 1.375
C) 0.625
D) 1.625
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A company has net income of $2 million. For the same period it
paid $750,000 in dividends. What is its retention ratio?
A) 0.375
B) 1.375
C) 0.625
D) 1.625
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following statements about the Return on Assets
ratio is NOT true?
A) Return on asset is used to determine a company's sustainable growth
rate.
B) Return on assets is used to measure a company's capital intensity.
C) Return on assets shows what a company can do with what it has.
D) The return on assets ratio is used to determine a company's internal
growth rate.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following statements about the Return on Assets
ratio is NOT true?
A) Return on asset is used to determine a company's sustainable growth
rate.
B) Return on assets is used to measure a company's capital intensity.
C) Return on assets shows what a company can do with what it has.
D) The return on assets ratio is used to determine a company's internal
growth rate.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is a recurring financial event that would be
included in a company's financial statements?
A) Gain on the sale of an asset.
B) Administrative expenses.
C) Design expenses related to a new manufacturing process.
D) Losses from theft.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is a recurring financial event that would be
included in a company's financial statements?
A) Gain on the sale of an asset.
B) Administrative expenses.
C) Design expenses related to a new manufacturing process.
D) Losses from theft.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is not one of the three types of major
industry sector?
A) Primary
B) Financial
C) Manufacturing
D) Tertiary
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is not one of the three types of major
industry sector?
A) Primary
B) Financial
C) Manufacturing
D) Tertiary
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is NOT an example of benchmarking using
ratio analysis?
A) Contrast a company's current ratio with its nearest competitor's.
B) Calculate a company's debt ratio and compare it to its industry's
average debt ratio.
C) Compare a company's gross profit margin to its gross profit margin
from last year.
D) Calculate the company's current ratio by comparing its current assets
with its current liabilities.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is NOT an example of benchmarking using
ratio analysis?
A) Contrast a company's current ratio with its nearest competitor's.
B) Calculate a company's debt ratio and compare it to its industry's
average debt ratio.
C) Compare a company's gross profit margin to its gross profit margin
from last year.
D) Calculate the company's current ratio by comparing its current assets
with its current liabilities.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is an example of trend analysis?
A) The company's current gross profit margin is compared with its gross
profit margin from past years.
B) The company's gross profit margin is compared with its industry's
average profit margins.
C) The company compares its current assets to its current liabilities.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is an example of trend analysis?
A) The company's current gross profit margin is compared with its gross
profit margin from past years.
B) The company's gross profit margin is compared with its industry's
average profit margins.
C) The company compares its current assets to its current liabilities.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is NOT a limitation of using ratio analysis to
evaluate a company?
A) Ratio analysis presents a complex view of the company, as the ratios
can be hard to interpret.
B) Stockholder sentiment may be a bigger driver of stock price than a
company's financial fundamentals.
C) Ratio analysis does not consider a number of important aspects of a
firm's success.
D) Ratio analysis is dependent on financial statements which may not be
accurate.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is NOT a limitation of using ratio analysis to
evaluate a company?
A) Ratio analysis presents a complex view of the company, as the ratios
can be hard to interpret.
B) Stockholder sentiment may be a bigger driver of stock price than a
company's financial fundamentals.
C) Ratio analysis does not consider a number of important aspects of a
firm's success.
D) Ratio analysis is dependent on financial statements which may not be
accurate.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following defines how inflation can distort financial
statements?
A) Assets are not properly valued on balance sheets since each is
recorded at its historical cost.
B) The impact of price changes on monetary assets and liabilities are not
clear.
C) Future capital needs are difficult to forecast and may lead to increased
leverage.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following defines how inflation can distort financial
statements?
A) Assets are not properly valued on balance sheets since each is
recorded at its historical cost.
B) The impact of price changes on monetary assets and liabilities are not
clear.
C) Future capital needs are difficult to forecast and may lead to increased
leverage.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is a cause of disinflation?
A) An increase in the growth rate of the money supply.
B) A recession.
C) A business cycle expansion.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is a cause of disinflation?
A) An increase in the growth rate of the money supply.
B) A recession.
C) A business cycle expansion.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
A business is based in a country whose currency is going through
deflation. What does that mean for the business.
A) The price for the goods and services it acquires within the country will
decrease.
B) All of these answers.
C) The business may need to decrease the price of its products and
services.
D) Fewer investors may purchase the company's stock or buy its
corporate bonds.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
A business is based in a country whose currency is going through
deflation. What does that mean for the business.
A) The price for the goods and services it acquires within the country will
decrease.
B) All of these answers.
C) The business may need to decrease the price of its products and
services.
D) Fewer investors may purchase the company's stock or buy its
corporate bonds.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following is a step in performing an account
reconciliation?
A) Check to make sure that you are using the correct beginning and
ending balances for the account.
B) Determine if the discrepancy is of sufficient magnitude to be corrected.
C) Review all transactions if you notice a discrepancy between third party
and in house records.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following is a step in performing an account
reconciliation?
A) Check to make sure that you are using the correct beginning and
ending balances for the account.
B) Determine if the discrepancy is of sufficient magnitude to be corrected.
C) Review all transactions if you notice a discrepancy between third party
and in house records.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Which of the following gains and losses are extraordinary?
A) Loss from write off of inventory due to the company's inability to sell
the goods.
B) Loss from write down of receivables due to the customer refusing to
pay.
C) Gain from the early retirement of debt.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
Which of the following gains and losses are extraordinary?
A) Loss from write off of inventory due to the company's inability to sell
the goods.
B) Loss from write down of receivables due to the customer refusing to
pay.
C) Gain from the early retirement of debt.
D) All of these answers.
Free to share, print, make copies and changes. Get yours at www.boundless.com
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Analyzing Financial Statements
Attribution
• Wikipedia. "Quick ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Quick_ratio
• Wikipedia. "Cash and cash equivalents." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Cash_and_cash_equivalents
• Wikipedia. "Treasury bills." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Treasury%20bills
• Wikipedia. "Return on assets Du Pont." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_assets_Du_Pont
• Wikipedia. "Return on assets." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_assets
• Wiktionary. "asset." CC BY-SA 3.0 http://en.wiktionary.org/wiki/asset
• Wiktionary. "net income." CC BY-SA 3.0 http://en.wiktionary.org/wiki/net+income
• Wikipedia. "Earnings before interest and taxes." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Earnings_before_interest_and_taxes
• Slideshare. "Financial Statement Analysis." CC BY-SA http://www.slideshare.net/nristreet/financial-statement-analysis12978969
• Connexions. "Profitability Ratios." CC BY 3.0 http://cnx.org/content/m15556/1.8/
• Wikipedia. "EBIT." CC BY-SA 3.0 http://en.wikipedia.org/wiki/EBIT
• Wikipedia. "Return on Assets." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return%20on%20Assets
• Wikipedia. "Net sales." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Net_sales
• Wikipedia. "Total Asset Turnover." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Total_Asset_Turnover
• Wikipedia. "Asset." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Asset
• Wikipedia. "profit margins." CC BY-SA 3.0 http://en.wikipedia.org/wiki/profit%20margins
• Wikipedia. "Inflation accounting." CC BY-SA 3.0
http://en.wikipedia.org/wiki/Inflation_accounting#Historical_cost_basis_in_financial_statements
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• Wikipedia. "Financial Accounting Standards Board." CC BY-SA 3.0
http://en.wikipedia.org/wiki/Financial_Accounting_Standards_Board
• Wikipedia. "hyperinflation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/hyperinflation
• Wikipedia. "historical cost basis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/historical%20cost%20basis
• Wikipedia. "Inflation accounting." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Inflation_accounting
• Wiktionary. "valuation." CC BY-SA 3.0 http://en.wiktionary.org/wiki/valuation
• Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//finance/definition/earnings-management
• Wikipedia. "Fundamental analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Fundamental_analysis
• Wikipedia. "Financial statement analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement_analysis
• Connexions. "Analysing financial statements." CC BY 3.0 http://cnx.org/content/m31777/latest/
• Wikipedia. "Comparable company analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Comparable_company_analysis
• Wiktionary. "sentiment." CC BY-SA 3.0 http://en.wiktionary.org/wiki/sentiment
• Wiktionary. "forecast." CC BY-SA 3.0 http://en.wiktionary.org/wiki/forecast
• Wikipedia. "Financial forecast." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_forecast
• Wikipedia. "Trend analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Trend_analysis
• Wikipedia. "Financial ratios." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_ratios
• Wikipedia. "Technical analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Technical_analysis
• Wikipedia. "Financial statement analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement_analysis
• Wikibooks. "Understanding the NAIC Stock Selection Guide." CC BY-SA 3.0
http://en.wikibooks.org/wiki/Understanding_the_NAIC_Stock_Selection_Guide
• Wikipedia. "Income statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Income_statement#Irregular_items
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• Wikipedia. "non-operating." CC BY-SA 3.0 http://en.wikipedia.org/wiki/non-operating
• Wikipedia. "Income statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Income_statement#Irregular_items
• Wikibooks. "GCSE Business Studies/Ratio Analysis." CC BY-SA 3.0
http://en.wikibooks.org/wiki/GCSE_Business_Studies/Ratio_Analysis
• Wikipedia. "Net profit." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Net_profit
• Wikipedia. "Profit margin." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Profit_margin
• Wiktionary. "gross profit." CC BY-SA 3.0 http://en.wiktionary.org/wiki/gross+profit
• Wiktionary. "net profit." CC BY-SA 3.0 http://en.wiktionary.org/wiki/net+profit
• Wikibooks. "Principles of Finance/History." CC BY-SA 3.0
http://en.wikibooks.org/wiki/Principles_of_Finance/History#Ratio_Analysis
• Wikipedia. "Financial statement analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement_analysis
• Wikipedia. "Financial ratios." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_ratios
• Wikipedia. "Financial ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_ratio
• Wiktionary. "shareholder." CC BY-SA 3.0 http://en.wiktionary.org/wiki/shareholder
• Wiktionary. "liquidity." CC BY-SA 3.0 http://en.wiktionary.org/wiki/liquidity
• Wiktionary. "ratio." CC BY-SA 3.0 http://en.wiktionary.org/wiki/ratio
• Wikipedia. "Return on equity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_equity
• Wikipedia. "Equity (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Equity_(finance)
• Wiktionary. "equity." CC BY-SA 3.0 http://en.wiktionary.org/wiki/equity
• Wikipedia. "Financial ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_ratio
• Wikipedia. "Operating margin." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Operating_margin
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//finance/definition/operating-income
• Wikipedia. "Balance sheet." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Balance_sheet
• Wiktionary. "asset." CC BY-SA 3.0 http://en.wiktionary.org/wiki/asset
• Wiktionary. "equity." CC BY-SA 3.0 http://en.wiktionary.org/wiki/equity
• Wiktionary. "balance sheet." CC BY-SA 3.0 http://en.wiktionary.org/wiki/balance+sheet
• Wikipedia. "P/B ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/P/B_ratio
• Wikipedia. "outstanding shares." CC BY-SA 3.0 http://en.wikipedia.org/wiki/outstanding%20shares
• Wikipedia. "PE ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/PE_ratio
• Wiktionary. "inflation." CC BY-SA 3.0 http://en.wiktionary.org/wiki/inflation
• Wikipedia. "time value of money." CC BY-SA 3.0 http://en.wikipedia.org/wiki/time%20value%20of%20money
• Wikipedia. "Debt ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Debt_ratio
• Wikipedia. "Financial ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_ratio#Debt_ratios_.28leveraging_ratios.29
• Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//accounting/definition/debt-to-total-assets-ratio
• Wiktionary. "goodwill." CC BY-SA 3.0 http://en.wiktionary.org/wiki/goodwill
• Wikipedia. "Days sales outstanding." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Days_sales_outstanding
• Wikipedia. "Average collection period." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Average_collection_period
• Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//accounting/definition/outstanding-check
• Wikipedia. "Days in inventory." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Days_in_inventory
• Wiktionary. "business cycle." CC BY-SA 3.0 http://en.wiktionary.org/wiki/business+cycle
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• Wikipedia. "Deflation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Deflation
• Wikipedia. "liquidity trap." CC BY-SA 3.0 http://en.wikipedia.org/wiki/liquidity%20trap
• Wikipedia. "deflationary spiral." CC BY-SA 3.0 http://en.wikipedia.org/wiki/deflationary%20spiral
• Wikipedia. "Disinflation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Disinflation
• Wiktionary. "business cycle." CC BY-SA 3.0 http://en.wiktionary.org/wiki/business+cycle
• Wiktionary. "recession." CC BY-SA 3.0 http://en.wiktionary.org/wiki/recession
• Wikipedia. "Reconciliation (accounting)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Reconciliation_(accounting)
• Answers.com. "How do you solve accounting discrepancies." CC BY-SA
http://wiki.answers.com/Q/How_do_you_solve_accounting_discrepancies#ixzz2CkYiQ7ha
• Wikipedia. "reconciliation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/reconciliation
• Wikipedia. "Return on equity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_equity
• Wikipedia. "DuPont analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/DuPont_analysis
• Wikipedia. "Earnings per share." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Earnings_per_share
• Wikibooks. "Principles of Finance/Section 1/Chapter 6/Corp/ROE." CC BY-SA 3.0
http://en.wikibooks.org/wiki/Principles_of_Finance/Section_1/Chapter_6/Corp/ROE
• Wiktionary. "fundamental analysis." CC BY-SA 3.0 http://en.wiktionary.org/wiki/fundamental+analysis
• Wikipedia. "Sustainable growth rate." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Sustainable_growth_rate
• Wikipedia. "Return on equity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_equity
• Wikispaces. "SU3FINANCE - Chapter 17 - Financial Modeling and Pro Forma Analysis." CC BY-SA
http://su3finance.wikispaces.com/Chapter+17+-+Financial+Modeling+and+Pro+Forma+Analysis
• Wikipedia. "Sustainable growth rate." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Sustainable_growth_rate
• Wikipedia. "Retention ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Retention_ratio
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• Wiktionary. "retention." CC BY-SA 3.0 http://en.wiktionary.org/wiki/retention
• Wikipedia. "Return on equity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_equity
• Wikipedia. "Return on assets." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_assets
• Wikipedia. "Capital intensity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Capital_intensity
• Wikispaces. "SU3FINANCE - Chapter 17 - Financial Modeling and Pro Forma Analysis." CC BY-SA
http://su3finance.wikispaces.com/Chapter+17+-+Financial+Modeling+and+Pro+Forma+Analysis
• Wikipedia. "Return on equity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_equity
• Wiktionary. "quantitatively." CC BY-SA 3.0 http://en.wiktionary.org/wiki/quantitatively
• Wikipedia. "DuPont analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/DuPont_analysis
• Wikipedia. "Net margin." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Net_margin
• Wikipedia. "Asset turnover." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Asset_turnover
• Wiktionary. "competitive advantage." CC BY-SA 3.0 http://en.wiktionary.org/wiki/competitive+advantage
• Wikipedia. "Return on equity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Return_on_equity
• Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//finance/definition/stock-split
• Wikipedia. "Dividend." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Dividend
• Wikipedia. "Dividend payout ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Dividend_payout_ratio
• Wikipedia. "Statement of Retained Earnings." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Statement_of_Retained_Earnings
• Wikipedia. "Retention ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Retention_ratio
• Wikipedia. "Retained earnings." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Retained_earnings
• Wikipedia. "working capital management." CC BY-SA 3.0 http://en.wikipedia.org/wiki/working%2520capital%2520management
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• Wikipedia. "Current ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Current_ratio
• Wikipedia. "Liquidity ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Liquidity_ratio
• Wikipedia. "Current liabilities." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Current_liabilities
• Wikipedia. "Current asset." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Current_asset
• Wikipedia. "Financial ratio." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_ratio
• Wikipedia. "Income statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Income_statement
• Wiktionary. "intangible asset." CC BY-SA 3.0 http://en.wiktionary.org/wiki/intangible+asset
• Wikipedia. "Non-operating income." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Non-operating%2520income
• Wikipedia. "EBITDA." CC BY-SA 3.0 http://en.wikipedia.org/wiki/EBITDA
• Wikipedia. "Times interest earned." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Times_interest_earned
• Wikipedia. "Earnings before interest and taxes." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Earnings_before_interest_and_taxes
• Wikipedia. "Fixed-asset turnover." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Fixed-asset_turnover
• Wikipedia. "Fixed asset." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Fixed_asset
• Wikipedia. "IAS." CC BY-SA 3.0 http://en.wikipedia.org/wiki/IAS
• Wikipedia. "holding cost." CC BY-SA 3.0 http://en.wikipedia.org/wiki/holding%2520cost
• Wikipedia. "Inventory turnover." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Inventory_turnover
• Wikipedia. "Inventory turnover." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Inventory_turnover
• Wikibooks. "GCSE Business Studies/Ratio Analysis." CC BY-SA 3.0
http://en.wikibooks.org/wiki/GCSE_Business_Studies/Ratio_Analysis
• Wikipedia. "Comparable company analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Comparable_company_analysis
Free to share, print, make copies and changes. Get yours at www.boundless.com
Analyzing Financial Statements
• Wikipedia. "Industry." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Industry
• Wikipedia. "Valuation (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Valuation_%2528finance%2529
• Wiktionary. "valuation." CC BY-SA 3.0 http://en.wiktionary.org/wiki/valuation
• Wikipedia. "metric." CC BY-SA 3.0 http://en.wikipedia.org/wiki/metric
• Wiktionary. "ratio." CC BY-SA 3.0 http://en.wiktionary.org/wiki/ratio
• Wiktionary. "benchmark." CC BY-SA 3.0 http://en.wiktionary.org/wiki/benchmark
• Wikipedia. "Financial ratios." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_ratios
• Wikipedia. "Benchmarking." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Benchmarking
• Wikipedia. "Comparable company analysis." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Comparable_company_analysis
• Wikipedia. "Financial statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement
• Wikipedia. "Financial forecast." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_forecast
• Wikibooks. "Principles of Finance/Section 1/Chapter 7/Efficient-Market Hypothesis." CC BY-SA 3.0
http://en.wikibooks.org/wiki/Principles_of_Finance/Section_1/Chapter_7/Efficient-Market_Hypothesis
• Wiktionary. "valuation." CC BY-SA 3.0 http://en.wiktionary.org/wiki/valuation
• Connexions. "Financial Awareness Drives Shareholder Value." CC BY 3.0 http://cnx.org/content/m30490/latest/
Free to share, print, make copies and changes. Get yours at www.boundless.com