Chapter 7 - Financial analysis techniques. This chapter describe tools and techniques used in financial analysis, including their uses and limitations; classify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios; describe relationships among ratios and evaluate a company using ratio analysis; | Chapter 7 Financial Analysis Techniques Presenter’s name Presenter’s title dd Month yyyy LEARNING OUTCOMES Describe tools and techniques used in financial analysis, including their uses and limitations. Classify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios. Describe relationships among ratios and evaluate a company using ratio analysis. Demonstrate the application of DuPont analysis of return on equity, and calculate and interpret effects of changes in its components. Calculate and interpret ratios used in equity analysis and credit analysis. Explain the requirements for segment reporting, and calculate and interpret segment ratios. Describe how ratio analysis and other techniques can be used to model and forecast earnings. 1 Financial analysis tools: description Graphics Regression Common-Size Analysis Financial Ratio Analysis Copyright © 2013 CFA Institute 2 LOS. Describe tools and techniques used in financial analysis, including their uses and limitations. This chapter covers four common financial analysis tools. The emphasis is on financial ratio analysis and common-size analysis. Before turning to financial ratio analysis and common-size analysis, let’s look briefly at graphics and regression as tools. 2 Graphics: example Copyright © 2013 CFA Institute 3 LOS. Describe tools and techniques used in financial analysis, including their uses and limitations. Charts facilitate comparisons and communication. This slide, created using an Excel pie chart, shows the geographic composition of the 2011 operating profit margin for Colgate-Palmolive’s oral, personal, and home care segment. The pie chart allows an analyst to communicate about the geographical composition of the segment’s operating profit. Most of the operating profit margin for Colgate-Palmolive’s oral, personal, and home care segment comes from Latin America. 3 Graphics: example Copyright © 2013 CFA Institute 4 $ millions LOS. Describe tools and techniques . | Chapter 7 Financial Analysis Techniques Presenter’s name Presenter’s title dd Month yyyy LEARNING OUTCOMES Describe tools and techniques used in financial analysis, including their uses and limitations. Classify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios. Describe relationships among ratios and evaluate a company using ratio analysis. Demonstrate the application of DuPont analysis of return on equity, and calculate and interpret effects of changes in its components. Calculate and interpret ratios used in equity analysis and credit analysis. Explain the requirements for segment reporting, and calculate and interpret segment ratios. Describe how ratio analysis and other techniques can be used to model and forecast earnings. 1 Financial analysis tools: description Graphics Regression Common-Size Analysis Financial Ratio Analysis Copyright © 2013 CFA Institute 2 LOS. Describe tools and techniques used in financial analysis, including their
