ACCOUNTG 321 Lecture Notes - Lecture 6: Financial Statement Analysis, Operational Risk, Credit Risk
2 Mar 2017
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Risk analysis: goal is to gain a glimpse of the future from past and present data using various tools and techniques, comparative financial statements. Allow financial statement users to compare year-to-year financial position. Help and analyst detect and predict trends: horizontal analysis. Allow analysts to enhance their comparison by expression each item as a percentage of that same item in the financial statements of another year: ratio analysis. Most common way of comparing accounting numbers to evaluate the performance and risk of a firm. Allows analysts to control for size differences over time and among firms: default risk. Co(cid:374)(cid:272)e(cid:396)(cid:374)ed a(cid:271)out a (cid:272)o(cid:373)pa(cid:374)y"s a(cid:271)ility to pay its obligations when they come due: operational risk. Relates more to how adept a company is at withstanding various events that might impair its ability of earning profits. Liquidity refers to the readiness of assets to be converted to cash.
