Business Administration - Financial Planning RFC125 Lecture Notes - Lecture 3: Financial Statement, Profit Margin, Asset Turnover
28 May 2018
School
Professor
Applying DuPont Analysis on Suncor and Imperial Oil for
discussion
Techniques of Ratio Analysis
• DuPont Analysis
• Comparative Analysis
• Trend Analysis
• Common-Size Statements
Interpreting Financial Ratios
• Compare to a natural benchmark
– ie. Does the firm have a return on capital less than the cost of
capital?
• Compare to industry ratios and averages
• Compare to major competitors
• Compare over time – trend
– Is the ratio improving?
– Look out for major business changes – acquisitions or
restructurings
Comparative vs. Trend Analysis
• Ratios on their own do not mean a lot
• Comparing a company’s ratios to those of its industry or its
competitors is comparative analysis and may reveal what ratios
are out of line with certain standards
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