Performance Measurement
Comparative Analysis
Horizontal, Vertical and Ratio Analysis
Liquidity Ratios
Current Ratio, Receivables Turnover, inventory turnover
Liquidity conclusion and summary of liquidity ratios
Solvency Ratios
Debt to total assets, times interest earned, free cash flow
Solvency conclusion and summary of solvency ratios
Profitability Ratios
Gross profit margin, profit margin, asset turnover, return on assets, return on common shareholders' equity, basic earnings per share, proce-earnign P-E, payout ratio, dividend yield
Profitability conclusion and summary of profitability ratios
Limitations
Deviersications
Alternative accounting
Other income
Nonercurring items
Comparative Analysis
Making comparisions about a company's past and current financial performance and position to better determine future expectations
Financial data as well as nonfinancal info should be reveiwed
Company's mission
Strategy
Goals and objectives
Management discussitons and Analysis
Screen clipping taken: 2024-04-08 7:39 PM
Horizontal Analysis
Also known as trend analysis
Express the change increase or decrease over time
Allows intra company comparsions
Comparing current data with other periods
Can be expressed as an amount or percentage
%of base year amount
%change for the year
Screen clipping taken: 2024-04-08 7:37 PM
Screen clipping taken: 2024-04-08 7:37 PM
Vertical Analysis
Also known as common size analysis
Expresses each item in a statement as a percent of a total amount
Comparsion of data within the statement nad within the same year
Expressed as a percentage
Screen clipping taken: 2024-04-08 7:38 PM
Ratio Analysis
Liquidity Ratios
Measure short-term ability of the company to pay its maturing obligations and to meet unexpected meeds for cash
Current Ratio
Measures short term debt ability and liability
Currents Ratio = Currents Assets/ Currents liabilities
Important to look at its components when assessing current ratio be cautious about influences of slow moving inventory
Receivables turnover
Measures liquidity receivables
Receivables turnover = Credit sales/ Average gross accounts Receivables
Average collection period
Measures number of days receivables are outstanding
Average collection period = 365 days/ receivablse turnover
Inventory turnover
Measures liquidity of inventory
Inventory turnover = Cost of Goods Sold/ Average Inventory
Days in inventory
Measures number of days inventory is on hand
Days in ventory = 365 days /inventory turnover
Solvecy ratios
Measrue the ability tof the company to surviv over a long period of time the ability to pay its total liabilities
Debt to total assets
Measures % of total assets provided financed with debt
Debt to total assets = Total liabilites/total assets
Times interest earned
Measures ability to meet interest payments as they come due
Times interest earned = Net income +Interest expense+ income tax expense/interest expense
Free cash flow
Measures cash availbale for paying dividends or expanding operations
Net cash provided by operating activities - net capital expenditures - dividends paid = free cash flow
Profitability ratios
Measure the operating success of a company for a specific period of time.
Gross Profit Margin
Measures margin between selling price and cost of goods sold
Gross profit margin = gross profit /sales
Progit Margin
Measures the percentage of profit generated by each dollar of sales
Profit Margin = Net income/sales
Asset turnover
Measures how efficiently assets are used to generate sales
Asset turnover = sales/average total assets
Return on assets
Measures overall profitability of assets
Return on assets= net income/average total assets
Return on common shareholders' equity
Measures overall profitability of shareholders' investment
Return on common shareholders' equity = net income- preferred dividends declared/average common shareholder's equity
Average common shareholders' equity = total shareholders' equity - preferred shares
Basic earning per share
Measures profit earned on each common share
Earnings per share = net incoem -
Price earning ratio
Payout raio
Dividend yield.
No comments:
Post a Comment