Learning Objectives

By the end of this section, you will be able to:

• Analyze financial statements and determine solvency and profitability.
• Analyze comparative financial statements.
• Calculate trend percentages.
• Prepare common-size financial statements.
• Calculate ratios that analyze a company’s earnings performance:
  •  Rate of return on total assets
  • Rate of return on common stockholders’ equity 3. Earnings per share
  • Price-earnings ratio
  • Dividend yield rate
• Calculate ratios that analyze a company’s long-term debt-paying ability:
  • Times interest earned
  • Debt to total assets ratio
  • Stockholders’ equity to total assets ratio
• Calculate ratios that analyze a company’s short-term debt-paying ability:
  • Working capital
  • Current ratio
  • Quick ratio
  • Inventory turnover
  • Accounts receivable turnover