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Lecture Accounting: What the numbers mean (2/e) - Chapter 11: Financial statement analysis

Chapter 11 - Financial statement analysis. After completing this unit, you should be able to: Explain how liquidity measures can be influenced by the inventory cost-flow assumption used, demonstrate the influence of alternative inventory cost-flow assumptions and depreciation on turnover ratios, calculate days sales in accounts receivable and inventory,. | CHAPTER 11 Financial Statement Analysis 11- Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn Slides prepared by John Tretola Learning Objectives Explain how liquidity measures can be influenced by the inventory cost-flow assumption used. Demonstrate the influence of alternative inventory cost-flow assumptions and depreciation on turnover ratios. Calculate days sales in accounts receivable and inventory. Explain the significance of the price/earnings ratio in the evaluation of share market price. Calculate the dividend yield and dividend payout ratios. Explain financial leverage. Prepare common size financial statements. Use of other operating statistics. 11- Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn Slides prepared by John Tretola Overview The process of interpreting an entity’s financial statements can be facilitated by certain ratio calculations. The focus of this topic is to expand the ability to read and interpret financial statements to help make decisions and informed judgements about an entity’s financial condition and results. 11- Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn Slides prepared by John Tretola Financial Statement Ratios Ratios can be used to facilitate the interpretation of an entity’s financial position and results. The results of operations of an entity can be grouped into the following four categories: Liquidity *Activity Profitability *Debt, or financial leverage *Market based . 11- Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn Slides prepared by John Tretola Liquidity Measures The liquidity measures of working capital, current ratios and quick ratios were discussed in Chapter 10. Important: The . | CHAPTER 11 Financial Statement Analysis 11- Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn Slides prepared by John Tretola Learning Objectives Explain how liquidity measures can be influenced by the inventory cost-flow assumption used. Demonstrate the influence of alternative inventory cost-flow assumptions and depreciation on turnover ratios. Calculate days sales in accounts receivable and inventory. Explain the significance of the price/earnings ratio in the evaluation of share market price. Calculate the dividend yield and dividend payout ratios. Explain financial leverage. Prepare common size financial statements. Use of other operating statistics. 11- Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn Slides prepared by John Tretola Overview The process of interpreting an entity’s financial statements can be .