Slide 14-1 Chapter 14 Financial Statement Analysis Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 14-1 Irwin/McGraw-Hill Chapter 14 Financial Statement Analysis
Slide 14-2 Purpose of Analysis Financial statement analysis helps users make better decisions e03 Internal Users External Users Managers Shareholders Officers Lenders Internal Auditors Customers Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 14-2 Irwin/McGraw-Hill Purpose of Analysis Internal Users External Users Financial statement analysis helps users make better decisions. Managers Officers Internal Auditors Shareholders Lenders Customers
Slide 14-3 Purpose of Analysis Financial measures are often used to rank corporate performance EXample measures include: Growth Return to Profit Return on in sales stockholders margIns equity Determined by analyzing the financial statements Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 14-3 Irwin/McGraw-Hill Purpose of Analysis Growth in sales Return to stockholders Profit margins Return on equity Determined by analyzing the financial statements. Financial measures are often used to rank corporate performance. Example measures include:
Slide 14-4 Financial Statements are Designed for Analysis Classified Comparative Consolidated Financial Financial Financial Statements Statements Statements Items with certain Amounts from Information for the characteristics are several years parent and subsidiary grouped together. appear side by side. are presented Results Helps identify Presented as if in standardized significant the two companies meaningful changes and are a single subtotals trends business unit Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 14-4 Irwin/McGraw-Hill Financial Statements are Designed for Analysis Results in standardized, meaningful subtotals. Items with certain characteristics are grouped together. Classified Financial Statements Helps identify significant changes and trends. Amounts from several years appear side by side. Comparative Financial Statements Presented as if the two companies are a single business unit. Information for the parent and subsidiary are presented. Consolidated Financial Statements
Slide 14-5 Tools of analysis Ability to meet short-term Ability to obligations and to efficiently Liquidity generate future revenues and generate and meet long-term revenues Solvency obligations Effie iciency Ability to provide Ability to financial rewards generate sufficient to positive attract and retain market financing Profitability Market expectations Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 14-5 Irwin/McGraw-Hill Tools of Analysis Liquidity and Efficiency Solvency Profitability Market Ability to meet short-term obligations and to efficiently generate revenues Ability to generate future revenues and meet long-term obligations Ability to generate positive market expectations Ability to provide financial rewards sufficient to attract and retain financing