ACCT 1105
Lesson 5 - Chapter 17
Analysis of Financial Statements


Lesson Competencies

  1. Explain the purpose and importance of financial statement analysis
  2. Identify the users of accounting information
  3. Identify and describe the four areas (building blocks) of analysis
    • Liquidity and efficiency
    • Solvency
    • Profitability
    • Market Prospects
  4. Identify and describe the four standards of comparison in financial analysis
    • Intracompany
    • Competitor
    • Industry
    • Guidelines
  5. Define, perform, and interpret Horizontal Analysis
    • Comparative Statements
    • Trend Analysis
  6. Define, perform, and interpret Vertical Analysis
    • Common-Size Statements
  7. Perform and interpret Ratio Analysis
    • Current Ratio
    • Acid-test ratio
    • Accounts receivable turnover
    • Inventory turnover
    • Days’ sales uncollected
    • Days’ sales in inventory
    • Total asset turnover
    • Debt ratio
    • Equity ratio
    • Pledged assets to secured liabilities
    • Times interest earned
    • Profit margin ratio
    • Return on total assets
    • Return on common stockholders’ equity
    • Book value per common share
    • Basic earnings per share
    • Price-earnings ratio
    • Dividend yield

Assignments