CHAPTER 9Advanced Financial Ratio Analysis and Terminology

PURPOSE AND ADVANCED TERMINOLOGY

This chapter picks up on our fictitious company overviewed in Chapter 8 and pushes forward with more advanced financial ratio and business analysis tools. We should note that it would be impossible to cover the entire range of financial tools, analyses, ratios, and so on utilized by professionals today, as just about everyone seems to have a new and wonderful analysis available to impress the powers that be. Our goal in this chapter is to provide more depth and understanding of various financial analyses that are commonly referenced and used in today's business world. You will notice a bias toward (a) analyzing cash flows and (b) more subjective calculations or estimates of figures, as when different people with different levels of training and expertise get involved, you are bound to get different perspectives (which of course is par for the course in the financial world these days).

We make every effort to provide some level of consistency and simplicity with the concepts covered in this chapter, but this would be a good point in the book to remind yourself to slow down and, if necessary, read the material multiple times. Before we start the discussion, a list of more advanced financial and accounting terminology has been provided to really help improve your financial vocabulary.

  • EBITDA: This is one of the most used (and abused) terms in finance today and stands for earnings before ...

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