12 Financial Statement Analysis

Question 1

Horizontal Analysis

Answer 1

Analysis of indiv accs (revenue, expenses, net income) over time

eg (100,000-93,500)/93,500 x 100%

Keep 93,500 as base year

Question 2

Vertical analysis

Answer 2

Shows r/s of financial statement items relative to total

Base:
Income statement: Total revenue

Balance sheet: Total assets

Question 3

Receivable turnover ratio

Inventory turnover ratio

Payables turnover ratio

Answer 3

Receivable turnover ratio = Net credit sales / avg acc receivables (net)

Inventory turnover ratio = Cost of goods sold / average inventory

Payables turnover ratio = Total supplier purchase / avg acc payable