%PDF-1.4 %âãÏÓ FINANCIAL STATEMENT ANALYSIS The major objectives of financial statement analysis are as follows: 1. startxref By financial ratios we mean taking a financial figure and looking at it relative to another financial figure. Financial Ratios are created from information contained in financial statements, and are used to gain insight about a company. Solvency Ratios Efficiency Ratios Profitability Ratios Market Prospect Ratios Coverage Ratios CPA Exam Ratios to Know CMA Exam Ratios to Know 3 8 12 17 23 28 31 32 Thanks for signing up for the MyAccountingcourse.com newletter. Introd uction Accounting ratios are widely used tools of financial analysis. Some of the many ratios and some of the terminology are included here: working capital current assets minus current liabilities. :Qv~,WøéÌteMÁc°6åL"1cRhY]öSæFºµü^YQÖD È2Ë Jî]Ãfyn>9ë»Â9ÿï'YàFÈSýþØ¹)Añmê5GÒ²úìÉ¸®6µý,vîªH÷^'ÆþI`Èïø½Â|!` Dù +, l¶Ku9WD' OU7©íË+2»[óÿ±½xÎ¬¹lGU"¹NÁâÙwd\p-¥{Tß´ÌÐcÐ/5O ½85f¤§úk-Ó´/+Ù»mþ¦8vÐ¬`ã×¶ÆéWï¬iq#)mLáËôX2¨6Üª d'¤¯,£i*:¡êÊ_-±^YE¡($ö'yú§ÆsÏ@ç¤¢á 0000012088 00000 n 55%. 932 0 obj<>stream If properly analyzed, they help identify areas on the financial statement needing further analysis. Financial ratios fall into several categories. Financial analysis helps managers with efﬁ ciency analy-sis and identiﬁ cation of problem areas within the ﬁ rm. 0000006060 00000 n These ratios simplify the process of determining the health of a listed company and make reported financial information more meaningful and useful for investors. fme-financial-ratio-formulas-checklist.pdf - Free download as PDF File (.pdf), Text File (.txt) or read online for free. Investors or creditors are interested in the trend of past sales, cost of goods sold, operating expenses, net income, cash flows and return on investment. Among the three, current ratio comes in handy to analyze the liquidity and solvency of the start-ups. As with all types of fundam ental analysis, it is often most useful to compare the financial ratios of a firm to those of other companies. There are five basic ratios that are â¦ Proﬁtability Ratios Solvency ratios measure a company’s ability to meet long-term obligations. In this e-book we cover 15 ratios We can group financial ratios into five broad categories: liquidity ratios, leverage ratios; repayment capacity ratio, efficiency ratios, and profitability ratios. endstream endobj 148 0 obj<>/Outlines 5 0 R/Metadata 25 0 R/PieceInfo<>>>/Pages 24 0 R/PageLayout/OneColumn/OCProperties<>/StructTreeRoot 27 0 R/Type/Catalog/Lang(EN-US)/LastModified(D:20070507174123)/PageLabels 22 0 R>> endobj 149 0 obj<>/PageElement<>>>/Name(HeaderFooter)/Type/OCG>> endobj 150 0 obj<>/Font<>/ProcSet[/PDF/Text]/Properties<>/ExtGState<>>>/Type/Page>> endobj 151 0 obj<> endobj 152 0 obj<> endobj 153 0 obj<> endobj 154 0 obj[/ICCBased 171 0 R] endobj 155 0 obj<> endobj 156 0 obj<> endobj 157 0 obj<>stream 0000004438 00000 n A financial leverage ratio provides information on the degree of a company's fixed financing obligations and its ability to satisfy these financing obligations. Financial ratios are no differentâthey form a basis of comparison between figures found on financial statements. 0000005646 00000 n The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities. 0000002647 00000 n The resulting ratio can be interpreted in a way that is more insightful than looking at the items separately. 902 0 obj <> endobj The ratios may be divided into these types: 1. To help identify the short term liquidity of a firm, this ratio is used. Ratio Analysis 1 | P a g e Introduction A sustainable business and mission requires effective planning and financial management. Finance Ratios Templates. Financial ratios fall into several categories. x�b```b``�e`e`�b�c@ >�(� �Æ�i. As with all types of fundamental analysis, it is often most useful to compare the financial ratios of a firm to those of other companies. 0000003318 00000 n 0000007165 00000 n A shareholder ratio describes the company's financial condition in terms of amounts per xÚbba`b``Å3Î¥¦y «J %%EOF Financial analysis is the process of using ﬁ nancial information to assist in investment and ﬁ nancial decision making. endstream endobj 172 0 obj<>/Size 147/Type/XRef>>stream 0000007209 00000 n Financial ratios are a relative measure of two or more values taken from the financial statements of a business and can be expressed as a decimal value such as 0.55 or as a percentage e.g. 0000006650 00000 n Chapter 5 72 Spring 2003 a number of useful ratios, we will turn the discussion toward the use of these ratios to examine the 5. endstream endobj 160 0 obj<>stream 147 27 Fundamental analysis relies on extracting data from corporate financial statements to compute various ratios. Subsets of these ratios are also known as “leverage” and “long-term debt” ratios. 0000001722 00000 n 0000002873 00000 n 5. <<587E038AC13EEB4ABCE508A9F59AB6AC>]>> 173 0 obj<>stream Financial Ratios Sheet Cost of goods sold Average inventory Number of days in period Inventory turnover Current assets Current liabilities Cash + Short term marketable securities + Receivables Current liabilities Total debt Total assets Total debt Total debt + Total shareholdersâ equity Gross proï¬t Revenue 0000001770 00000 n Financial ratios are no differ ent âthey form a basis of comparison between figures found on financial statem ents. xÚb```b``u``e`àÂÀÇ |,@Q/XØîII¸KqLp*YÙR¸ EÝ«$ÖÑLB´ q(f`Paàe¾áÛ¬Â®`ÐÀ °#ËAÉý «ã}Ý}M½@Eæi~6 -ÆÀ!Å v7500Ä~ð¹ÔàÖUTT16@ Ay An activity ratio relates information on a company's ability to manage its resources (that is, its assets) efficiently. The table below shows the calculations of these ratios. 0000005518 00000 n By financial ratios we mean taking a financial figure and looking at it relative to another financial figure. 0000002116 00000 n For the purpose of … If it doesnât meet your investment ratio criteria, then kill it. In this e-book we cover 15 ratios 0000003188 00000 n basic accounting formula â accountingtools. Operating cycle Inventory Inventory Number of days of inventory Average day's cost of goods sold Cost of goods sold / 365 = = Accounts receivable Accounts receivable Number of days of receivables Average day's sales on credit Sales on 0000015787 00000 n financial ratios balance sheet accountingcoach. 0000002554 00000 n 0000010345 00000 n Analyzed, they help identify areas on the degree of a company it is termed as ratio., they help identify areas on the financial statements, and burn rate financial information more meaningful and for. 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