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.
204 Part 1 Financial Reporting and the Accounting Cycle Exhibit 1:History of Microsoft’s Stock Price per Share 0.00 ... One purpose of fi-nancial statement analysis is to use the past performance of a company to predict how it will do in the future. Another purpose is to evaluate the performance of a company with an eye
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