Unit 18: Financial Statement Analysis

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:
    • ┬áRate 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