Presentation on theme: "Financial Statement Analysis"— Presentation transcript:
1 Financial Statement Analysis Next PageClick HereFinancial Statement AnalysisAnalytical techniques used to examine relationships among financial statement itemsCovered hereHorizontal analysis (Dollar and percentage changes on statements)Trend analysisCommon-size statements (Vertical analysis)Ratios
2 Next PageClick HereHorizontal AnalysisHorizontal analysis shows the changes between years in the financial data in both dollar and percentage form.
3 Horizontal Analysis (using comparative financial statements) Next PageClick HereHorizontal Analysis (using comparative financial statements)Calculating Change in Dollar AmountsDollarChangeCurrent YearFigureBase Year=–Calculating Change as a PercentagePercentageChangeDollar ChangeBase Year Figure100%=×
4 Horizontal Analysis – Balance Sheet Next PageClick HereHorizontal Analysis – Balance Sheet20A is the base year$12,000 – $23,500 = $(11,500)($11,500 ÷ $23,500) × 100% = 48.9%
5 Horizontal Analysis – Income Statement Next PageClick HereHorizontal Analysis – Income Statement$520,000 – $480,000 = $40,000$40,000 ÷ $480,000) × 100% = 8.3%
6 Next PageClick HereTrend AnalysisTrend percentages state several years’ financial data in terms of a base year, which equals 100 percent.TrendPercentageCurrent Year AmountBase Year Amount100%=×
7 20C Amounts ÷ 20B Amounts × 100% = trend percentage Next PageClick HereTrend AnalysisThe base year is 2002, and its amounts will equal 100%.20C Amounts ÷ 20B Amounts × 100% = trend percentage( $290,000 ÷ $275,000 ) × 100% = 105%( $198,000 ÷ $190,000 ) × 100% = 104%( $ 92,000 ÷ $ 85,000 ) × 100% = 108%
8 Next PageClick HereTrend AnalysisTrend percentages can be used to construct a graph so the trend over time can be seen.
9 Common-Size Statements – Vertical Analysis Next PageClick HereCommon-Size Statements – Vertical AnalysisCommon-size statements use percentages to express the relationship of individual components to a total within a single period.This approach to financial statement analysis is also known as vertical analysis.
10 Common-Size Statements Next PageClick HereCommon-Size StatementsNet sales is usually the base and is expressed as 100%.
Your consent to our cookies if you continue to use this website.