Introduction To Analysis Of Financial Statements

Question 1

Techniques for analysis

Answer 1

1. Common-size statements/vertical analysis.
2. Common base year financial statements/horizontal/trend analysis.
3. Ratio analysis.

Question 2

Profitability ratio [ interested stakeholders]

Answer 2

1. Shareholders
2. Management
3. Employees
4. Creditors
5. Competitors
6. Potential investors

Question 3

Liquidity ratio [interested stakeholders]

Answer 3

1. Shareholders
2. Suppliers
3. Creditors
4. Competitors

Question 4

Efficiency ratio [interested stakeholders]

Answer 4

1. Shareholders.
2. Potential purchasers.
3. Competitors.

Question 5

Shareholders ratio [interested stakeholders]

Answer 5

1. Shareholders.

2. Potential investors.

Question 6

Capital structure [interested stakeholders]

Answer 6

1. Shareholders.
2. Lenders.
3. Creditors.
4. Potential investors.

Question 7

Return on Capital Employed [ROCE] for companies.

Answer 7

1. Return on capital employed sourced from ordinary shareholders.
2. Return on capital employed sourced from all long-term suppliers of capital.