MGMT 20000 Chapter 12: CHAPTER 12 : FinACC

• School: Purdue University
• Department: Management
• Course: MGMT 20000
• Professor: Frank Kane

Document Summary

Vertical analysis (common size analysis) - express each item in financial statement as % of the same base amount. Fiscal year a year that used for accounting purposes. Use vertical analysis to express each income statement item as percentage of sales. Percentage of total assets in the balance sheet. Horizontal analysis (trend analysis/ time-series analysis) analyze trends in financial statement data for a single company over time (calculate the amount and percentage change in account from last year to this year). Formula for horizontal analysis = (current year prior year)/prior year. Gross profit = net sales cost of goods sold. Ratios how income statement differ from the balance sheet, where balance sheet should express as an average of the beginning and ending balances. Solvency company"s ability to pay its long-term liabilities. Profitability analysis measures earnings or operating effectiveness. Gross profit ratio = indicates the portion of each dollar of sales above its cost of goods sold.