Chapter 6 Financial statement Analysis 6-1
6-1 Chapter 6 Financial Statement Analysis
Financial Statement Analysis a Financial statements n A Possible Framework for Analysis n Ratio Analysis n Trend Analysis a Common- Size and Index analysis 6-2
6-2 Financial Statement Analysis Financial Statements A Possible Framework for Analysis Ratio Analysis Trend Analysis Common-Size and Index Analysis
Examples of External Uses of Statement Analysis n Trade Creditors - Focus on the liquidity of the firm n Bondholders- Focus on the long term cash flow of the firm n Shareholders- Focus on the profitability and long-term health of the firm 6-3
6-3 Examples of External Uses of Statement Analysis Trade Creditors -- Focus on the liquidity of the firm. Bondholders -- Focus on the long-term cash flow of the firm. Shareholders -- Focus on the profitability and long-term health of the firm
Examples of Internal Uses of Statement Analysis n Plan Focus on assessing the current financial position and evaluating potential firm opportunities. Control- Focus on return on investment for various assets and asset efficiency n Understand-- Focus on understanding how suppliers of funds analyze the firm 6-4
6-4 Examples of Internal Uses of Statement Analysis Plan -- Focus on assessing the current financial position and evaluating potential firm opportunities. Control -- Focus on return on investment for various assets and asset efficiency. Understand -- Focus on understanding how suppliers of funds analyze the firm
Primary Types of Financial statements Balance sheet n A summary of a firm's financial position on a given date that shows total assets total liabilities owners'equity Income statement n A summary of a firms revenues and expenses over a specified period, ending with net income or loss for the period 6-5
6-5 Primary Types of Financial Statements Income Statement A summary of a firm’s revenues and expenses over a specified period, ending with net income or loss for the period. Balance Sheet A summary of a firm’s financial position on a given date that shows total assets = total liabilities + owners’ equity