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(lively music) — Okay, for those of you via the blog here, we are in Finance 370. This is a Business Finance course, it's a core course. We have a blog for those of you who don't know that it's coming live in the next month so, we're filming a couple of classes here and there, and I don't you'll be shown, so feel free to talk like normal as they go forward. But what we are doing today is we are basically learning some financial analysis skills. And so, I have a packet of information for you. This Alcatraz Corporation. So, we have to balance sheet and an income statement if you watch it via the blog, I think we're going to put it on the blog post as well. We have an Excel file you can download. What you're going to see here is a balance sheet and an income statement are the first two tabs. And so we have two different years, just a basic balance sheet and income statement. Just as a quick review, you got your current assets and your concurrent assets, your long term assets right there. You got your current liabilities, and here's your long term debt, and your equity items right here. So, we got year over year, for two years. And then we have income statement as well for three years. So, this is something that you might see in a little more complex form whenever you look at publicly traded company, and you're trying to decide do I want to invest in this company or not. And so, Apple is a hot stock now, you know, they are $670 per share, their coming out with iPhone five. Should you invest in Apple? Well, before you do that, hopefully, you download their financials and give it a little review here and see whether the financials, the underlying financials are good more than just the rumors of the iPhone 5 coming out that are driving the stock price. So, what we're doing here today is we're learning some skills to look at balance sheet and income statement to see whether the company is strong or the company is not strong. So, on the PowerPoint slide, let's just go through a couple of things here. This should be viable on the web as well. The first thing we're going to do is Horizontal Analysis. And, whenever we do Horizontal Analysis, we're just looking at change year over year. Okay, so you could do this with a number of things even outside the financial statements if you are trying to figure out what your percent raise was or what the percent tuition increase at Viola was year over year. You would be doing Horizontal Analysis. So, all you're doing here is basically taking the current year minus the prior year, and you are dividing by the prior year. Okay, so just a simple example if you made $1,000 in some summer job last year, and then this year, you made $1,200 if we're putting it in the formula right here. We'd have 1,200 as our current year, minus our 1,000 for the prior year divided by your 1,000, you're beginning your base is always your denominator right there and so, you would look at this, and you would say plus 20×. Okay? So, we can do...
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