Week 10 Key Concepts Flashcards
Horizontal analysis:
compute the dollar and percentage changes for important items and
classification totals for two or more years. Dollar increases and decreases are divided by the earliest year’s data to highlight large percentage changes. Detecting improvement or deterioration in a firm’s performance and spots trends. Useful for single firm analysis (intra-firm analysis).
Vertical analysis:
a percentage is computed by dividing one number by another in a single
year’s financial statements, can detect unusual relationships of line items. Useful for inter-firm
analysis (comparison) through common size financial statements.
Trend Analysis:
consider more than 2 years. Tools: regression and time series analysis.
Ratio Analysis:
build fractions with data from financial statements (numerator and denominator)
Profitability:
the ability to generate earnings.
Liquidity:
the ability to stay solvent
Financial Leverage:
the capital structure of a firm magnifies, or leverages, the return to shareholders.
Working capital =
= Current Assets – Current Liabilities
Quick assets =
Cash + Temporary Investments + Receivables
Download the annual audited financial statements of any company from SEDAR and perform a
complete intrafirm analysis to determine its position in 1) profit, 2) liquidity, 3) asset
management, 4) solvency and 5) market value.
Download the annual audited financial statements of another company from the same industry to
perform and interfirm analysis along the 5 items used for the first company.
Download the annual audited financial statements of any company from SEDAR and perform a
complete intrafirm analysis to determine its position in 1) profit, 2) liquidity, 3) asset
management, 4) solvency and 5) market value.
Download the annual audited financial statements of another company from the same industry to
perform and interfirm analysis along the 5 items used for the first company.
