FIN 305 Chapter Notes - Chapter 14: Financial Risk, Cash Flow, Bes
6 Nov 2016
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M14e - balance sheet iv: analysis & interpretation. Techniques/analyses to use the above statements to find meaning in them: vertical, horizontal, combined, metrics/ratios, graphic. *using multiple of the above will reveal best insights. Using only the bs to evaluate liquidity & solvency: Look at the working capital block to find info needed (ie. short term/current assets/liabilities; when will cash flow in/out over next 12 months) *working capital = current assets - current liab. s. Amount of time needed to convert to cash w/out material discount. Ability to pay short-term debts as/when they come due. Working capital = current assets - current liabilities. Margin of safety (def ): diff. between value and price (related to stock value) Solvency: financial risk when utilizing l. t. leverage. Should be looking to increase outputs while reducing inputs. Be"s ability to generate sales using assets. The higher the ratio = the better. *get sales from is; get avg. from bs.
