FINANCIAL STATEMENT ANALYSIS
After studying this chapter, you should be able to:
- Explain why knowledge of the business is important when drawing conclusions about a company's future financial health.
- Describe the various ways of analyzing a company's financial statements.
- Identify the types of ratios that are best at providing insights for specific decisions.
- Calculate specific ratios that are used to assess a company's profitability, short-term liquidity, activity, and solvency, and explain how the ratios can be interpreted.
- Calculate and explain the uses of the earnings per share ratio and the price/earnings ratio.
- Understand the differences that might affect the ratio analysis of non-manufacturing or non-retail companies.
- Understand the need to exercise caution when interpreting ratios.
- Use ratios to assess a company's financial health through an analysis of its performance and financial position.
A Real-Life Exercise in Financial Management
Proper analysis of financial statements requires a good understanding of the statements' various ...