ACCT 2301 Lecture Notes - Lecture 15: Credit Theory Of Money, Gross Profit, Net Income
6 Nov 2018
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Horizontal analysis: looking at data across the years (left and right) Trend analysis: type of horizontal, but it looks at multiple years: Vertical analysis: looks data at just one year (up and down) Everything is divided by the total; and everything adds up. Working capital (wc) = current assets (ca) current liabilities (cl) Current ratio (cr) = ca/cl should be > 1 (most comp. are 1. 5) Gross profit (gp) percentage = / = % Debt ratios = total liabilities / total assets = % Shows % of assets financed by debt. The higher the %, the higher the risk for creditor. If return on assets > interest rate on loans; can make a lot of money. Rate of return on total assets = (net income + interest expense) / avg. total assets = % Earnings per share: required to be of face of income statement for all publicly traded corporations.
