Financial Statements II - Reynolds Week 2011

Accounting II: Tools for Analysis
Strictly Financials
Jan. 5, 2011

Donald W. Reynolds National Center
For Business Journalism
At Arizona State University
Strictly Financials

James K. Gentry, Ph.D.
Clyde M. Reed Teaching Professor
School of Journalism and Mass Communications
University of Kansas
[email_address]
Strictly Financials

Common Size Analysis
A technique that turns all financial statement entries into percentage of revenue
Then can look at percentage change and percentage point change
Strictly Financials

Why Common Size
Identify trends
Identify what causes changes in totals on financial statements
Easier to compare percentages than raw numbers
Easier to compare companies
Easier to compare company with industry averages
Strictly Financials

Doing Common Size
For IS, divide Revenue into all entries.
For BS, divide each total category into its category items. For example, divide Total Assets into each category of assets.
For CF, divide each total category into its category items.
Strictly Financials

Comparable Statements
Often have to restructure Income Statement to the In-the-Box format we studied
Typical problems come from items we would consider Other Income/Expenses
Strictly Financials

Trends in Margins
How have Cost of Goods Sold and Sales, General & Administrative changed?
What does that mean for Gross Profit and Operating Profit?
How does Net Profit Margin move?
Value of using Basis Points
Strictly Financials

Common Size, Ratios
These techniques let you drill below the surface and start developing a more complete picture of the company’s performance
Strengths
Weaknesses
Strategic effectiveness of the firm
Strictly Financials

Financial Statements II - Reynolds Week 2011

by Reynolds Center for Business Journalism on Jan 05, 2011

Accessibility

Categories

Tags

Upload Details

Usage Rights

1 Embed 872

Statistics

Financial Statements II - Reynolds Week 2011 — Presentation Transcript