Chapter 13 - Analyzing financial statements. After you have read this chapter you should be able to: Explain the purpose and identify the building blocks of analysis, describe standards for comparisons in analysis, summarize and report results of analysis, explain and apply methods of horizontal analysis, describe and apply methods of vertical analysis, define and apply ratio analysis. | Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 Analyzing Financial Statements Conceptual Learning Objectives C1: Explain the purpose and identify the building blocks of analysis. C2: Describe standards for comparisons in analysis. 13- A1: Summarize and report results of analysis. A2: Appendix 13A – Explain the form and assess the content of a complete income statement (see text for details). Analytical Learning Objectives 13- P1: Explain and apply methods of horizontal analysis. P2: Describe and apply methods of vertical analysis. P3: Define and apply ratio analysis. Procedural Learning Objectives 13- Liquidity and Efficiency Solvency Profitability Market Prospects Ability to meet short-term obligations and to efficiently generate revenues Ability to generate future revenues and meet long-term obligations Ability to generate positive market expectations Ability to provide financial rewards sufficient to attract and retain financing Building Blocks of Analysis C1 13- Standards for Comparison When interpreting measures, we need to decide whether the measures indicate good, bad, or average performance. We can use the following to make that judgment: Intracompany Competitor Industry Guidelines (rule of thumb) C 2 13- The more experience one gains in performing such analyses, the easier it becomes to interpret the results. Like anything else, practice goes a long way in this area. Horizontal Analysis Comparing a company’s financial condition and performance across time. Tools of Analysis C 1 Comparing a company’s financial condition and performance to a base amount. Vertical Analysis Measurement of key relations between financial statement items Ratio Analysis 13- Calculate Change in Dollar Amount Dollar change Analysis period amount Base period amount = – Since we are . | Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 Analyzing Financial Statements Conceptual Learning Objectives C1: Explain the purpose and identify the building blocks of analysis. C2: Describe standards for comparisons in analysis. 13- A1: Summarize and report results of analysis. A2: Appendix 13A – Explain the form and assess the content of a complete income statement (see text for details). Analytical Learning Objectives 13- P1: Explain and apply methods of horizontal analysis. P2: Describe and apply methods of vertical analysis. P3: Define and apply ratio analysis. Procedural Learning Objectives 13- Liquidity and Efficiency Solvency Profitability Market Prospects Ability to meet short-term obligations and to efficiently generate revenues Ability to generate future revenues and meet long-term obligations Ability
