Transcription of Introduction to Financial Statement Analysis
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Introduction to Financial Statement Analysis
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. By the endof 1992, IBM had an estimated value of $ decline in value can be traced to a strategic errormade by IBM in the early 1980s. Prior to 1981, IBM wasthe major player in the computer market and was theprimary provider of computers for government, univer-sities, and businesses.
Financial statement analysis often points to areas in which additional data must be gath-ered, including details of significant transac-tions, market share information, competitors’ plans, and customer demand forecasts. Exhibit 2:The Need for Financial Statement Analysis Prepare Financial statements Analyze Financial statements Gather ...
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