[go: up one dir, main page]
Scribd
Upload
10 views1 page

Financial Analysis Visual Notes

The document outlines three financial analysis methods: Horizontal Analysis, which compares financial items over multiple periods to identify trends; Vertical Analysis, which compares different items within the same period as a percentage of totals; and Ratio Analysis, which evaluates company performance through key financial ratios categorized into liquidity, solvency, and profitability. It also provides tips for interpreting ratios effectively, emphasizing the importance of comparing to industry benchmarks and analyzing trends over time. Overall, these analyses are essential for assessing a company's financial health and performance.

Uploaded by

Eloisa Blanco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
10 views1 page

Financial Analysis Visual Notes

The document outlines three financial analysis methods: Horizontal Analysis, which compares financial items over multiple periods to identify trends; Vertical Analysis, which compares different items within the same period as a percentage of totals; and Ratio Analysis, which evaluates company performance through key financial ratios categorized into liquidity, solvency, and profitability. It also provides tips for interpreting ratios effectively, emphasizing the importance of comparing to industry benchmarks and analyzing trends over time. Overall, these analyses are essential for assessing a company's financial health and performance.

Uploaded by

Eloisa Blanco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Financial Analysis Summary: Horizontal, Vertical & Ratio Analysis

Horizontal Analysis (Trend Analysis) - Compares same financial item over multiple
periods. - Shows trends in dollar or % change. - Use base year or prior year as
comparison. - Percentage Change = ((Current - Previous) / Previous) × 100 Vertical
Analysis (Common Size) - Compares different items in the same period. - Converts items to
% of total (e.g., % of Sales or Assets). - Useful for comparing companies of different
sizes.

Ratio Analysis Overview - Evaluates company performance using relationships between


financial items. - Three main categories: Liquidity Ratios: Working Capital = Current
Assets Current Liabilities Current Ratio = Current Assets ÷ Current Liabilities A/R
Turnover = Net Credit Sales ÷ Avg. A/R Days to Collect = 365 ÷ A/R Turnover Inventory
Turnover = COGS ÷ Avg. Inventory Days to Sell = 365 ÷ Inventory Turnover Solvency
Ratios: Debt-to-Assets = Total Liabilities ÷ Total Assets Debt-to-Equity = Total
Liabilities ÷ Equity Times Interest Earned = EBIT ÷ Interest Expense Profitability
Ratios: Asset Turnover = Net Sales ÷ Avg. Assets ROA = Net Income ÷ Avg. Assets ROE
= Net Income ÷ Avg. Equity EPS = (Net Income Pref. Dividends) ÷ Avg. Shares P/E
Ratio = Market Price ÷ EPS Dividend Yield = Dividends ÷ Market Price

Tips for Interpreting Ratios: - Compare to industry benchmarks. - Use trends over time,
not just one period. - Don t rely on one ratio analyze the full picture. - Understand
what s behind changes (e.g., inflation, business cycles).

You might also like