Kế toán, kiểm toán - Chapter 15: Financial statement analysis

Financial Statement AnalysisChapter 15McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Limitations of Financial Statement AnalysisWe use the LIFO method to value inventory.We use the average cost method to value inventory.Differences in accounting methods between companies sometimes make comparisons difficult.Limitations of Financial Statement AnalysisAnalysts should look beyond the ratios.Economic factorsIndustry trendsChanges within the companyTechnological changesConsumer tastesStatements in Comparative and Common-Size Form Dollar and percentage changes on statements Common-size statements RatiosAn item on a financial statement has little meaning by itself. The meaning of the numbers can be enhanced by drawing comparisons.Horizontal AnalysisDollarChangeCurrent YearFigureBase YearFigure=–The dollar amounts for last year become the “base” year figures.Calculating Change in Dollar AmountsPercentageChangeDollar Change Base Year Figure 100%=×Horizontal AnalysisCalculating Change as a PercentageTrend Percentages Trend percentages state several years’ financial data in terms of a base year, which equals 100 percent. Trend AnalysisTrendPercentage Current Year Amount Base Year Amount100%=×Common-Size StatementsVertical analysis focuses on the relationships among financial statement items at a given point in time. A common-size financial statement is a vertical analysis in which each financial statement item is expressed as a percentage. Gross Margin PercentageGross Margin Percentage Gross Margin Sales=This measure indicates how muchof each sales dollar is left after deducting the cost of goods sold to cover expenses and provide a profit.Financial LeverageFinancial leverage results from the difference between the rate of return the company earns on investments in its own assets and the rate of return that the company must pay its creditors. Published Sources That Provide Comparative Ratio DataEnd of Chapter 15