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Fin Acc: chpt 13: financial Statement Analysis


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Horizontal Analysis
A comparison of financial statement items over a period of time.
Vertical Analysis
A comparison of various financial statement items within a single period with the use of common-size statements.
The nearness to cash of the assets and liabilities.
Current Ratio
current assets / current liabilities
Gross Profit Ratio
Gross Profit / Net Sales
Acid (quick)test Ratio
cash + marketable securities + current receivables / Current Liabilities
Inventory Turnover Ratio
Cost of goods sold / average inventory
Number of days sales in inventory
360* / inventory turnover

*# of days in a period
Accounts Receivable Turnover Ratio
Net Credit Sales / Average Accounts Receivable
Number of days sales in receivable
360 / accounts receivable turnover
The ability of a company to remain in business over the long term.
Times interest earned
net income + interest expense + income tax expense / interest expense
Debt to Equity Ratio
Total Liabilities / Total Stockholders Equity
Debt to Assets Ratio
total liabilities / total assets

*smaller the ratio the better
How well management is using company resources to earn a return on the funds invested by various groups.
Profit Margin on Sales Ratio
Net Income / Net Sales
Return on Assets
Net income + interest expense, net of tax (1-.?) / average total assets
Return on Stockholders Equity
Net income - preferred dividends / average common stockholders equity

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