FINANCIAL STATEMENT ANALYSIS TOOLS - PowerPoint PPT Presentation

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FINANCIAL STATEMENT ANALYSIS TOOLS
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FINANCIAL STATEMENT ANALYSIS TOOLS

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    1. CHAPTER 3 FINANCIAL STATEMENT ANALYSIS TOOLS

    2. OBJECTIVES Discuss and interpret the analysis tools of financial statement. Apply several basic financial statement major ratios and techniques. Identify the relevant analysis information beyond financial statements. Explain the types of equity or valuation analysis methods. Analyze the ways to use the ratio and caution using the financial tools.

    3. FINANCIAL ANALYSIS TOOLS The basic tools are: Comparative financial statement Horizontal Analysis Trend Index Analysis Common size financial statement Ratio analysis Profitability analysis Credit Analysis Equity Analysis and Evaluation

    4. Comparative Financial Statement Analysis Comparative financial statement analysis involves a review of changes in individual account balances on year-to-year or multiyear basis. The most important information often revealed from a comparative financial statement analysis is trend. referred to as horizontal analysis. HORIZONTAL ANALYSIS: Shows the changes between years in the financial data in both amount and percentage form. AMOUNT CHANGE = CURRENT YEAR BASE YEAR TREND INDEX ANALYSIS: Trend percentages state several years financial data in terms of a base year, which equals 100 percent Trend index = Current Year Amount X 100 Base Year Amount