# ACCY111 Lecture Notes - Financial Statement Analysis, Quick Ratio, Australian Securities Exchange

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9 May 2018
School
Department
Course
Professor
Analysis and Interpretation of Financial Statements
Sources of financial information:
Financial statements
Accompanying schedules
Explanatory notes
Australian stock exchange (ASX)
Stockbroking firms
What can you do with this data/information to make it meaningful?
Technical skills to learn this week
Comparative analysis
Horizontal analysis
Vertical analysis
Ratio analysis
Liquidity ratios
Solvency ratios
Profitability ratios
Limitations of financial analysis
Comparative Analysis:
3 types of useful comparative information
1. Intra-entity basis
Comparisons within a single entity (detects changes in financial relationships and trends)
2. Industry averages
Between entities in same industry (determines position relative to others)
3. Inter-entity basis
Between other entities (indicates competitive position)
Why do this?
Helps to identify relationships among data
Reduces data to an understandable basis
May be helpful in forecasting performance
3 basic comparative analysis techniques
1. Horizontal analysis
Evaluates a series of financial data over time
2. Vertical analysis
Evaluates financial items in relation to a base amount
3. Ratio analysis analysis
Evaluates a comprehensive range of financial relationships representing difference aspects of an
entity's activities.
Percentage analysis:
Horizontal analysis
Uses preceding years financial statements
Focuses on change from year to year
Compares % changes rather than dollars
One year is selected as the base year and then increases or decreases are based on the formula:
From 2015 to 2016 the cash at bank of Sandra ltd increased by \$30000 from \$740000 to \$770000.
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## Document Summary

Sources of financial information: financial statements, accompanying schedules, explanatory notes, financial advisory services, australian stock exchange (asx, stockbroking firms. Technical skills to learn this week : comparative analysis, horizontal analysis, vertical analysis, ratio analysis, liquidity ratios, solvency ratios, profitability ratios, limitations of financial analysis. Why do this: helps to identify relationships among data, reduces data to an understandable basis, may be helpful in forecasting performance. Horizontal analysis: uses preceding years financial statements, focuses on change from year to year, compares % changes rather than dollars, one year is selected as the base year and then increases or decreases are based on the formula: From 2015 to 2016 the cash at bank of sandra ltd increased by from to . Trend analysis: needs 3 or more years, used to assess growth prospects, each year compared to base year. Ratio analysis: ratio analysis can be used to make both: Inter-entity comparisons: 3 types of ratios, liquidity, solvency (financial stability, profitability.

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