COMMERCE 1AA3 Lecture Notes - Lecture 1: Cash Flow, Financial Statement, Income Statement
11 Jan 2019
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Document Summary
The objective of financial reporting is to provide useful information to investors and creditors to make decisions about investing in a business. Investors and creditors are interested in getting their money back plus a return on their investments. A business can pay back investors and creditors when it is from its future earnings. Therefore, investors and creditors are interested in predicting future cash flows. With horizontal analysis you will need to define a base year. Base is arbitrary, but usually we pick the earliest year as a base year. Number for base year are all 100: study of percentage changes from year-to-year, two steps, compute dollar amount of change, divide dollar amount of change by base-period amount. Trend percentages (1 of 2: form of horizontal analysis, base year selected and set equal to 100% Amount of each following year stated as a percent of base.
