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FINANCIAL STATEMENT ANALYSIS (liquidity & solvency analysis (Working…
FINANCIAL STATEMENT ANALYSIS
horizontal analysis
:
percentage
analysis of
increases and decreases
in
related items
in comparative financial statements
vertical analysis
:
percentage
analysis of the
relationship of each component
in a financial statement
to a total
within the statement
common-size statements
are often useful for comparing one company with another or for comparing a company with industry averages
liquidity & solvency analysis
Working Capital
= Current Assets - Current Liabilities
Current Ratio
= (Current Assets)/(Current Liabilities)
Quick Ratio
= (Quick Assets)/(Current Liabilities)
Accounts Receivable Turnover
= (Net Sales^2)/(Average Accounts Receivable)
Number of Days’ Sales in Receivables
= (Average Accounts Receivable)/(Average Daily Sales)
Inventory Turnover
= (Cost of Goods Sold)/(Average Inventory)
Number of Days’ Sales in Inventory
= (Average Inventory)/(Average Daily Cost of Goods Sold)
Ratio of Fixed Assets to Long Term Liabilities
= (Fixed Assets (net))/(Long Term Liabilities)
Fixed Charge Coverage Ratio
= (Income Before Income Tax + Interest Expense)/(Interest Expense)
profitability analysis
Ratio of Net Sales to Assets
= (Net Sales)/(Average Total Assets (exc Long Term Investments))
Rate Earned on Total Assets
= (Net Income + Interest Expense)/(Average Total Assets)
Rate Earned on Stockholders' Equity
= (Net Income)/(Average Total Stockholders' Equity)
Rate Earned on Common Stockholders' Equity
= (Net Income - Preferred Dividends)/(Average Common Stockholders' Equity)
Earnings per Share on Common Stock
= (Net Income - Preferred Dividends)/(Share of Common Stock Outstanding)
Price Earnings Ratio
= (Market Price per Share of Common Stock)/(Earnings per Share on Common Stock)
Dividends per Share
= (Dividends on Common Stock)/(Shares of Common Stock Outstanding)
Dividend Yield
= (Dividends per Share of Common Stock)/(Market Price per Share of Common Stock)