📘 TOPIC 7: Financial Statement Analysis – Part 1 Flashcards
(14 cards)
What is the formula for Horizontal Analysis in terms of Dollar Change?
Dollar Change = Current Year – Prior Year
This formula helps in comparing financial performance over time.
How do you calculate the percentage change in Horizontal Analysis?
% Change = (Current – Prior) / Prior × 100
This formula indicates the growth or decline in financial performance.
What is the formula for Common Size % in the Income Statement?
Common Size % (Income Statement) = Item / Sales Revenue × 100
This analysis allows comparison of income statement items relative to sales.
How is Common Size % calculated for the Balance Sheet?
Common Size % (Balance Sheet) = Item / Total Assets × 100
This helps in understanding the proportion of each asset relative to total assets.
What is the formula for Gross Profit Margin?
Gross Profit Margin = Gross Profit / Sales Revenue × 100
This ratio indicates how efficiently a company produces its goods.
How do you calculate the Net Profit Margin?
Net Profit Margin = Profit / Sales Revenue × 100
This ratio reflects the overall profitability of a company after all expenses.
What does Return on Assets (ROA) measure and how is it calculated?
Return on Assets (ROA) = Profit / Average Total Assets × 100
This ratio assesses how effectively a company uses its assets to generate profit.
What is the formula for Return on Equity (ROE)?
Return on Equity (ROE) = Profit Available to Owners / Average Equity × 100
This measures the return generated on shareholders’ equity.
How is the Cash Flow to Sales Ratio calculated?
Cash Flow to Sales Ratio = Cash Flow from Operating Activities / Sales Revenue × 100
This ratio indicates how well sales translate into cash flow.
What is the formula for Asset Turnover?
Asset Turnover = Sales Revenue / Average Total Assets
This ratio measures a company’s efficiency in using its assets to generate sales.
How do you calculate Days Inventory?
Days Inventory = (Average Inventory / Cost of Sales) × 365
This indicates how long inventory is held before being sold.
What is the formula for Inventory Turnover?
Inventory Turnover = Cost of Sales / Average Inventory
This ratio assesses how quickly inventory is sold and replaced.
How is Days Debtors calculated?
Days Debtors = (Average Trade Debtors / Sales Revenue) × 365
This indicates the average time taken to collect receivables.
What does Debtors Turnover measure and how is it calculated?
Debtors Turnover = Sales Revenue / Average Trade Debtors
This ratio evaluates how effectively a company collects its receivables.
