Unit 5 Flashcards
1
Q
Net working capital
A
Current assets - Current liabilities
Must be positive because I would mean enough cash is available to pay off liabilities
2
Q
Ratio analysis
A
- Comparatively: the in(de)crease on ratio from last year to now
- Why is there an increase
- If it decreased, suggest ways to improve it
3
Q
Time trend analysis
A
Looks at same ratio over a number of years
4
Q
Peer group analysis
A
Compares ratio with similar firms in the same industry
5
Q
Problems with financial statement analysis
A
- Different firms use different accounting procedures
- Different firms end their fiscal years at different times
- Unusual events may affect financial performance
- Companies in same industry may not be comparable
- Many firms are conglomerates