Financial Statement Analysis

Question 1

Horizontal Analysis

For what?

Answer 1

to find trends (change through the years)

Question 2

Vertical Analysis

What is common-size FS?

Answer 2

amounts are ratio or %

Question 3

Vertical Analysis

What is the amount that is used as 100%?

Answer 3

Balance Sheet - Total Assets
Income Statement - Net Sales

Question 4

turnovers and return on x ratios

Balance Sheet account

Answer 4

BS account is always average

Without beg, With end
- ENDING is already the AVERAGE

Question 5

Liquidity Ratios

Current Assets vs Quick Assets

Answer 5

Quick Assets = inventory not included anymore

Question 6

Activity / Efficiency Ratio (TURNOVERS)

format of formulas

Answer 6

Income Statement / Average Balance Sheet

Question 7

Recite the format of formula

Solvency / Leverage Ratio

Answer 7

Ratios included:
- times x earned (where x is deducted numerator)
- x / y

Question 8

Recite the format of formula

Profitability / Performance Ratio

Answer 8

Ratios included:
- x margin (net sales denominator)
- return on x (income after IT numerator)

Question 9

Recite the format of formula

Market Value / Prospect Ratio

Answer 9

Ratios included:
- yield (MP / share denominator)
- payout (EPS denominator)