4287297
Description
Mind Map by Loui Daniél Llid, updated more than 1 year ago
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Created by Loui Daniél Llid
over 8 years ago
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Financial Statement and Ratio Analysis
- Financial Statement Analysis involves using two or more line items from
a financial statement, which forms a ratio, to make calculations and
interpret results
- 4 types of Financial Statements
- INCOME STATEMENT
- provides a financial summary of the firm's operating results during a
specified period
- provides a financial summary of the firm's operating results during a
specified period
- BALANCE SHEET
- summary statement of the firm's financial position at a given point in time
- summary statement of the firm's financial position at a given point in time
- STATEMENT OF STOCKHOLDER'S EQUITY
- shows all equity account transactions that occurred during a given
year
- shows all equity account transactions that occurred during a given
year
- STATEMENT OF CASH FLOWS
- provides a summary of the firm's operating, investment, and financing cash flows and reconciles them
with changes in its cash and marketable securities during the period
- provides a summary of the firm's operating, investment, and financing cash flows and reconciles them
with changes in its cash and marketable securities during the period
- INCOME STATEMENT
- LIQUIDITY RATIO
- Liquidity ratio analyze the ability of a company to pay off both its current liabilities as they become
due as well as their long-term liabilities as they become current.
- Let's look at an example of a liquidity ratio, the current ratio. Current in this instance means short term, less than a year. The
current ratio is calculated by taking current assets divided by current liabilities. Assets are items the business owns, such as
truck, and liabilities are obligations the business owes, such as a loan.
- The current ratio tells us how well we're able to pay our current liabilities or obligations. This analysis is
important to determine how well we're able to pay our obligations with what we own.
- The current ratio tells us how well we're able to pay our current liabilities or obligations. This analysis is
important to determine how well we're able to pay our obligations with what we own.
- Let's look at an example of a liquidity ratio, the current ratio. Current in this instance means short term, less than a year. The
current ratio is calculated by taking current assets divided by current liabilities. Assets are items the business owns, such as
truck, and liabilities are obligations the business owes, such as a loan.
- Liquidity ratio analyze the ability of a company to pay off both its current liabilities as they become
due as well as their long-term liabilities as they become current.
- DEBT RATIO
- The debt ratio explains what percentage of our assets are financed with loans.
Remember assets are items we own, such as truck, and a truck loan is considered a liability or debt.
- To calculate the debt ratio, you take total liabilities divided by total assets. But remember
you don't use just one asset or one liability but all of them. The higher the percentage, the
more of your assets are calculated with debt.
- In other words, the higher the percentage, the less of the asset you own. This ratio would be
important to determine how much debt a company is in and if they're in a solid financial position
to take on more debt.
- In other words, the higher the percentage, the less of the asset you own. This ratio would be
important to determine how much debt a company is in and if they're in a solid financial position
to take on more debt.
- To calculate the debt ratio, you take total liabilities divided by total assets. But remember
you don't use just one asset or one liability but all of them. The higher the percentage, the
more of your assets are calculated with debt.
- The debt ratio explains what percentage of our assets are financed with loans.
Remember assets are items we own, such as truck, and a truck loan is considered a liability or debt.
- PROFITABILITY RATIO
- a profitability ratio is a measure of profitability, which is a way to measure a company's performance.
Profitability is simply the capacity to make a profit, and a profit is what is left over from income
earned after you have deducted all costs and expenses related to earning the income.
- The formulas you are about to learn can be used to judge a company's
performance and to compare its performance against other similarly
- Types of Profitability Ratios - common profitability ratios used in
analyzing a company's performance include gross profit margin ( GPM
), operating margin ( OM ), return on assets ( ROA ), return on sales (
ROS ), and return on investment ( ROI )
- Gross Margin tells you about the profitability of your goods and services. it tells
you how much it cost you to produce the product. it is calculated by dividing your
gross profit ( GP ) by your net sales ( NS ) and multiplying the quotient by 100:
Gross Margin = Gross Profit/Net Sales x 100 GM= GP/NS x 100
- Operating Margin takes into account the costs of producing the product or services that are unrelated
to the direct production of the product or services, such as overhead and administrative expenses.
Operating Margin = Operating profit / Net Sales x 100
- Return on Assets measures how effectively
the company produces income from its assets
Return on Assets = Net Income / Assets x 100
- Return on Assets measures how effectively
the company produces income from its assets
Return on Assets = Net Income / Assets x 100
- Operating Margin takes into account the costs of producing the product or services that are unrelated
to the direct production of the product or services, such as overhead and administrative expenses.
Operating Margin = Operating profit / Net Sales x 100
- Gross Margin tells you about the profitability of your goods and services. it tells
you how much it cost you to produce the product. it is calculated by dividing your
gross profit ( GP ) by your net sales ( NS ) and multiplying the quotient by 100:
Gross Margin = Gross Profit/Net Sales x 100 GM= GP/NS x 100
- Types of Profitability Ratios - common profitability ratios used in
analyzing a company's performance include gross profit margin ( GPM
), operating margin ( OM ), return on assets ( ROA ), return on sales (
ROS ), and return on investment ( ROI )
- The formulas you are about to learn can be used to judge a company's
performance and to compare its performance against other similarly
- a profitability ratio is a measure of profitability, which is a way to measure a company's performance.
Profitability is simply the capacity to make a profit, and a profit is what is left over from income
earned after you have deducted all costs and expenses related to earning the income.
- 4 types of Financial Statements
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