Basic Accounting Principles精品分析.pptVIP

Statement of Owner Equity Explains the change in owners equity between two balances sheets Changes due to : Net income Change in inventory valuation Family living withdrawals Capital contributions Capital distributions * Financial Analysis All business owners should have a basic set of financial statements at their disposal and they should know how to analyze and interpret them. * Financial Analysis Two Objectives Measure financial condition of the business Measure financial performance of the business * Financial Analysis Horizontal Analysis Vertical Analysis Ratio Analysis * Horizontal Analysis Looks at trends in performance and strength over time For example, percent change in net income from year to year * Vertical Analysis Looks at within year events rather than over time For example, interest expense as a percent of total expenses * Ratio Analysis Allows for consistent comparison of a single business over time as well as comparison between businesses Converts nominal dollar amounts to a common basis * Source of data for Ratio Analysis Balance Sheet Income Statement * Farm Financial Standards Council (Five Criteria) Liquidity Solvency Profitability Financial Efficiency Repayment Capacity * Ratio Analysis 16 different ratios commonly used Each has limitations Proper interpretation is critical * Liquidity Ability of a business to pay current liabilities as they come due * Liquidity Current Ratio Current Assets/Current Liabilities Less than one is bad Working capital Current assets minus current liabilities Negative number is bad * Solvency Ability of the firm to repay all of its financial obligations * Solvency Debt to Asset Ratio Total liabilities/total assets Greater than one bad Equity to Asset Ratio Total equity/total assets Debt to Equity Ratio Leverage ratio Less than one better * Profitability Rate of return on assets Rate of return on equity Operating profit margin ratio * Financial Efficiency Measures the intensity with which a business uses its assets t