Chapter 18

Assessing Financial Performance

In This Chapter

arrow Doing vertical, horizontal, and cross comparisons

arrow Making comparisons over time and against industry competitors

arrow Judging the quality of earnings

arrow Calculating how well investments are paying off

You can analyze a corporation in many ways — by looking at its cash flows, equity, debt, assets, and so forth — but one important consideration is whether or not the corporation is actually financially successful. That piece of information is worth knowing. Is the corporation you’re looking at primed to be the next shooting star destined to be a global sensation, or is it doomed to suffer a fate that will land everyone associated with its operations in a North Korean prison camp? Okay, maybe that’s a bit of an exaggeration, but it’s still important to know whether or not a particular corporation is financially successful, whether you’re an investor, a manager, a regulator, an employee, a supplier, a partner, a competitor, or just some schmuck who writes introductory corporate finance books.

In this chapter, I explain how to evaluate ...

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