Financial Statement Analysis Flashcards
Horizontal Analysis
For what?
to find trends (change through the years)
Vertical Analysis (common-size FS)
- What is the amount that is used as 100%?
What is common-size FS?
Balance Sheet - Total Assets
Income Statement - Net Sales
turnovers and return on x ratios
Treatment for BS accounts
BS account is always average
Without beg, With end
- ENDING is already the AVERAGE
Liquidity Ratios
Current Assets vs Quick Assets
Quick Assets = inventory not included anymore
(Cash + MES + AR)
Activity / Efficiency Ratio (TURNOVERS)
format of formulas
Income Statement / Average Balance Sheet
Recite the format of formula
Solvency / Leverage Ratio
Ratios included:
- times x earned → where x is deducted numerator)
- x / y
Recite the format of formula
Profitability / Performance Ratio
Ratios included:
- x margin → denominator = net sales
- return on x → numerator = income after IT
Recite the format of formula
Market Value / Prospect Ratio
Formula for Plowback Ratio
Ratios included:
- yield → denominator = MP / share
- payout → denominator = EPS
100% less Dividend Payout
Dupont Formula
- how to get ROE?
ROE = ROA (ROSATO) x Equity Multiplier
Formula for AFN (External Financing Required)
(1) Required Increase in Assets
(2) Less : Spontaneous Increase in Liabilities
(3) Less : Increase in Retained Earnings
= AFN
How to get 1, 2 ,3 ?
- Δ in Sales x (Asset / Sales)
- Δ in Sales x (Liabilities / Sales)
- Earnings After Tax less Dividend Payout
Formula for AFN (External Financing Required)
(1) Required Increase in Assets
(2) Less : Spontaneous Increase in Liabilities
(3) Less : Increase in Retained Earnings
= AFN
Formula for Alternative Solution
Assets less Liabilities x (%Δ in Sales)
Less : Sales x Profit Margin x Plowback Ratio
