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SS7 (FRA): Reading 24.1 - Introduction to Financial Ratio
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Terms in this set (24)
comparison to industry norm or average
cross sectional
comparison to a company's past ratios
time series
vertical common size income statement expresses each account as a percentage of ______
sales
vertical common size balance sheet expresses each account as a percentage of ______
total assets
in horizontal common size statement, each account on a given year on a column is shown relative to some _______
base year
horizontal common size statement facilitates ______
trend analysis
graphs are used to ________
communicate analyst's conclusion visually
types of graphs
pie, stacked column, line
use of ratios 1; project ________
future earnings and cash flow
use of ratios 2; evaluate a firm's ______
flexibility
use of ratios 3; assess _______
management's performance
use of ratios 4; evaluate changes in the ________ over time
firm and industry
use of ratios 5; compare the firm with ______
its peers
limitations of financial ratios 1; they are not _______ - i.e. only valid when compared to other firms
useful in isolation
limitations of financial ratios 2; ________ may distort the ratios, particularly when analyzing non-U.S. firms
different accounting treatments
limitations of financial ratios 3; ________ for companies that operate in multiple industries may be challenging
finding comparable industry ratios
limitations of financial ratios 4; all ratios must be viewed _______
relative to one another
limitations of financial ratios 5; determining the target or comparison value requires some ______
range of acceptable values
firms operating in many industries must disclose _____ in footnotes
segmental analysis
common size income statement is used to analyze change in ______ and ______
cost structure, profitability
common size income statement can be used for both ______ and ______
cross sectional, trend analysis
increased COGS percentage of sales suggests a lower ______ or higher ______
price, direct costs
increased SG&A percentage of sales suggests a lower ______ or higher _______
price, costs
______ analysis can be used to identify relationships between variables and is often used for ______
regression, forecasting
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