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Identify the industry economic characteristics. ... Identify company strategies. ... Assess the quality of the firm's financial statements. ... Analyze current profitability and risk. ... Prepare forecasted financial statements. ... Value the firm.
Current ratio. Compares current assets to current liabilities, to see if a business has enough cash to pay its immediate liabilities. Days sales outstanding. ... Debt to equity ratio. ... Dividend payout ratio. ... Gross profit ratio. ... Inventory turnover. ... Net profit ratio. ... Price earnings ratio.
Quick Ratio: In order to calculate the quick ratio, take the Total Current Ratio for 2010 and subtract out Inventory. Divide the result by Total Current Liabilities. You will have: Quick Ratio = 642-393/543 = 0.46X. For 2011, the answer is 0.52X.
Financial ratios are relationships determined from a company's financial information and used for comparison purposes. Examples include such often referred to measures as return on investment (ROI), return on assets (ROA), and debt-to-equity, to name just three.
Several techniques are commonly used as part of financial statement analysis. Three of the most important techniques include horizontal analysis, vertical analysis, and ratio analysis.
Identify the industry economic characteristics. ... Identify company strategies. ... Assess the quality of the firm's financial statements. ... Analyze current profitability and risk. ... Prepare forecasted financial statements. ... Value the firm.
The three financial statements are the income statement, balance sheet, and statement of cash flows. The income statement is a statement that illustrates the profitability of the company. It begins with the revenue line and after subtracting various expenses arrives at net income.
People who analyze the financial statements of a company include company executives, competitors, creditors, managers and potential investors. Three of the most common types of financial statement analysis are horizontal, vertical and ratio analysis.
Three of the most common tools of financial statement analysis are 1. Horizontal analysis---- comparison of a company's financial condition and performance across time.
There are many ways to measure financial performance, but all measures should be taken in aggregate. Line items, such as revenue from operations, operating income, or cash flow from operations can be used, as well as total unit sales.
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