Financial Statement Analysis
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C H A P T E R
Financial Statement
Analysis
LEARNING OBJECTIVES
After you have mastered the material in this chapter, you will be able to:
1
Describe factors associated with communicating useful information.
LP13
2
Differentiate between horizontal and vertical analysis.
3
Explain ratio analysis.
4
Calculate ratios for assessing a company’s liquidity.
5
Calculate ratios for assessing a company’s solvency.
6
Calculate ratios for assessing company management’s effectiveness.
7
Calculate ratios for assessing a company’s position in the stock market.
8
Explain the limitations of financial statement analysis.
CHAPTER OPENING
Expressing financial statement information in the form of ratios enhances its usefulness. Ratios permit compari-
sons over time and among companies, highlighting similarities, differences, and trends. Proficiency with common
financial statement analysis techniques benefits both internal and external users. Before beginning detailed
explanations of numerous ratios and percentages, however, we consider factors relevant to communicating
useful information.
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