ADMS 2500 Lecture 15: Financial Statement Analysis

• School: York University
• Department: Administrative Studies
• Course: ADMS 2500

Document Summary

Financial statement analysis is very beneficial as it ensures optimal allocation of scarce resources. Quantitative factors are considerations of investors and creditors that can be expressed numerically. Size and industry rank: indicates the ability to exercise control within its industry. Stability: indicates the likelihood the firm will have the time to realize its potential. Two basic approaches: intra firm analysis across time: one firm"s performance tracked over time, inter firm analysis across firms: compare your firm against other companies. Vertical analysis reports each amount on a financial statement as a percentage of another item. For example, on an income statement, you define sales as 100%. All other numbers on income statement are a percentage of sales. If sales is ,000 and cogs is ,000. Common-size financial statements contain the percentages of a key figure alone, without the corresponding dollar figures. This removes the problem of comparing different size firms.