COMM 211 Lecture Notes - Lecture 11: Financial Statement, Income Statement, Capital Structure
2 Dec 2017
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Document Summary
Horizontal analysis is the percentage change year-to-year. Trend analysis is a horizontal analysis over a period of time. Relationship of a financial statement item to a base amount for the same statement: it is reported as a percentage change. Income statement % = each item sales. Balance sheet % = each item total assets. Combine horizontal analysis to identify year-over-year trends. Comparison of a company to a standard such as your competitors or an industry average. Common size statements present each statement item as a percentage: this aids in comparing companies. Quantifies the relationship between certain accounting numbers. Trend analysis see possible strengths and weaknesses by comparing current and prior year"s ratios. Benchmarking compare your ratios to other comparable firms or what was expected to be achieved or an industry average. Measures the relative solvency of the organization: solvency position can change very quickly so the orientation of the ratios is relatively short-term in focus.
