Financial Statement Analysis Flashcards
Involves the assessment and evaluation of the firm’s past performance, its present condition, and future business potentials.
Financial statement analysis
What are the concerns of FS users when reading FS?
Future periods
Despite having historical information, users are concerned about the future of the company.
This is defined as the ability to produce a return on an investment based on its resources
Profitability
It measures how an individual or company meets their short-term obligations as they fall due.
Liquidity
It measures the ability of a company to meet its long-term obligations
Solvency
True or false: Safety of business investment is not relevant in decision making
False
Accounting concept that calculates how quickly a business conducts its operations
Turnover
Measure of the ability of a security to be bought and sold
Marketability
FS Analysis where each line item is listed as a percentage of a base figure in the statement.
Vertical analysis (common-size FS)
Shows assets, liabilities, and owners’ equity as a percentage of total assets
Common-size balance sheet
This kind of FS analysis enables investors and analysts to see what has been driving a company’s financial performance over time.
Horizontal analysis
The base period in a horizontal analysis FS is ________________
Earliest period
Accounts receivable as of Dec. 31, 20x1 amounted to P100,000, while accounts receivable as of Dec. 31, 20x0 amounted to P40,000. By how much did A/R increase?
150%
(100k-40k)/40k
Cash flow from this activity reflects how much cash is generated from a company’s products/services
Operating activities
Examples of cash flow from this activity: purchase of PPE, loans received from customers.
Investing activities
