Kế toán, kiểm toán - Chapter 23: Financial statement analysis

1-*McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Financial Statement Analysis Section 1: Vertical AnalysisChapter23Section ObjectivesUse vertical analysis techniques to analyze a comparative income statement and balance sheet.Phases of Statement AnalysisComputation Phase:Vertical analysisHorizontal analysisRatio analysisInterpretation Phase: Comparison of ratiosBudgeted ratiosIndustry AveragesComparative StatementCommon-size StatementEach item is expressed as either a percentage of total assets or of total liabilities plus stockholders’ equity.Vertical Analysis of the Balance SheetCashTotal assets =$115,231$555,711 = 20.7% Accounts payable Total liabilities plus Stkhldrs’ equity=$ 71,000$ 555,711 = 12.8%Total stockholders’ equityTotal liabilities plus Stkhldrs’ equity=$316,306$ 555,711 = 56.9%Financial Statement Analysis Section 2: Horizontal AnalysisChapter23Section ObjectivesUse horizontal analysis techniques to analyze a comparative income statement and balance sheet.Use trend analysis to evaluate financial statements.Interpret the results of statement analyses by comparison with industry averages. Evaluates financial statements for two or more periods. Compares items in each line to determine the change in dollar amounts. Uses the same method for both the income statement and the balance sheet. Horizontal AnalysisA percentage change can be shown by using the earlier figure as the base Use horizontal analysis techniques to analyze a comparative income statement and balance sheetObjective 2Trend analysis compares selected ratios and percentages over a period of time.ANSWER:QUESTION:What is trend analysis?Often the time period is five years Use trend analysis to evaluate financial statementsObjective 3Trend AnalysisThe percentage of gross profit on sales to net sales decreased from 41.7 percent in 2012 to 41.0 percent in 2013. 2009 2010 2011 2012 2013Using Industry AveragesTrade associations survey their members to obtain financial information and other data.Data is converted to a uniform presentation, usually in common-size statements arranged by company size. Individual companies compare their results to industry averages. Interpret the results of the statement analyses by comparison with industry averagesObjective 4Financial Statement Analysis Section 3: RatiosChapter23Section ObjectivesCompute and interpret financial ratios that measure profitability, operating results, and efficiency.Compute and interpret financial ratios that measure financial strength.Compute and interpret financial ratios that measure liquidityRecognize shortcomings in financial statement analysis.Ratio AnalysisFinancial ratios have three classifications:Profitability, operating results, and efficiencyFinancial strength Liquidity Rate of return on sales. Rate of return on common stockholders’ equity. Earnings per share of common stock (EPS). Price-earnings ratio. Yield on common stock. Rate of return on total assets. Asset turnover.Ratios Measuring Profitability, Operating Results, and Efficiency Compute and interpret financial ratios that measure profitability, operating results, and efficiencyObjective 5Number of times bond interest earned.Ratio of stockholders’ equity to total equities.Ratio of stockholders’ equity to total liabilities.Book value per share of stock.Ratios Measuring Financial Strength Compute and interpret financial ratios that measure financial strengthObjective 6Working capitalCurrent ratioAcid-test ratioInventory turnoverAccounts receivable turnoverRatios Measuring Liquidity Compute and interpret financial ratios that measure liquidityObjective 7Financial statements use book values.Book value depends on accounting policies and procedures.Businesses have choices about certain things, such as depreciation methods and useful lives.Financial statements assume that the dollar is a stable monetary unit.No two companies are exactly the same:Different legal entitiesDifferent product mixesDifferent financing methodsPrecautionary Notes on Statement AnalysisFinancial statement analysis is useful only if these limitations are understood Recognize shortcomings in financial statement analysisObjective 8