Transcription of Introduction to Financial Statement Analysis
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Learning Objectives5chapterIntroduction to FinancialStatement Analysis1 Explain the purposeof Financial the rela-tionships between finan-cial Statement numbersand use ratios in analyz-ing and describing a com-pany s common-size fi-nancial statements to per-form comparison offinancial statements acrossyears and between theDuPont framework andhow return on equity canbe decomposed into itsprofitability, efficiency,and leverage cash flow infor-mation to evaluate cashflow the limita-tions of Financial studying this chapter, youshould be able to: 2003 Getty 11/13/03 7:39 PM Page 202In 1987, IBMwas the most valuable company in theworld, worth an estimated $ billion.
analysis of Microsoft’s financial statements reveals some of the reasons for the declining stock price. That is the topic of this chapter—an introduction to financial state-ment analysis. With some basic analysis tools (called ra-tios), we will be able to conduct some fundamental analysis of a company’s financial statements. Our analy-
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