Financial Statement Analysis

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Financial Statement Analysis
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Financial Statement Analysis
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Presentation transcript:

Financial Statement Analysis Vertical Analysis Horizontal Analysis Ratio Analysis Limitations on Financial Statement Analysis

Vertical Analysis Compares each element in the statement to a base number In the income statement, the base is net revenue In the balance sheet, the base is total assets Analyze the trend of each element over the five year period

Horizontal Analysis Compares each element in the statement to that same element in the statement of the previous year Where vertical analysis shows the relative value of each element to the base number, horizontal analysis shows the rate of change in the element Analyze the trend of each element over the four year period

Ratio Analysis Refer to the reading describing various ratios Note the current elements in the balance sheet

Limitations of Statement Analysis References to net income Historical cost vs current values Elements not reflected in the financial analysis

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