Category Archives: Financial Statements

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Key Financial Ratios – Market Value

There are a number of key financial ratios that can be used to assess a firm’s performance, competitiveness and ability borrow and pay debt. These key financial ratios cover a broad range of performance indicators including: (1) Profitability, (2) Asset Productivity, (3) Liquidity, (4) Solvency / Financial Leverage and (5) Market Value. This tutorial is the last of 5 on key financial ratios. Market Value is covered in this last one. 

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Key Financial Ratios – Solvency / Financial Leverage

There are a number of key financial ratios that can be used to assess a firm’s performance, competitiveness and ability borrow and pay debt. These key financial ratios cover a broad range of performance indicators including: (1) Profitability, (2) Asset Productivity, (3) Liquidity, (4) Solvency / Financial Leverage and (5) Market Value. This tutorial is the fourth of 5 on key financial ratios. Solvency / Financial Leverage is covered in this one. 

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Key Financial Ratios – Liquidity

There are a number of key financial ratios that can be used to assess a firm’s performance, competitiveness and ability borrow and pay debt. These key financial ratios cover a broad range of performance indicators including: (1) Profitability, (2) Asset Productivity, (3) Liquidity, (4) Solvency / Financial Leverage and (5) Market Value. This tutorial is the third of 5 on key financial ratios. Liquidity is covered in this one. 

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Key Financial Ratios – Asset Productivity

There are a number of key financial ratios that can be used to assess a firm’s performance, competitiveness and ability borrow and pay debt. These key financial ratios cover a broad range of performance indicators including: (1) Profitability, (2) Asset Productivity, (3) Liquidity, (4) Solvency / Financial Leverage and (5) Market Value. This tutorial is the second of 5 on key financial ratios. Asset Productivity is covered in this one. 

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Key Financial Ratios – Profitability

There are a number of key financial ratios that can be used to assess a firm’s performance, competitiveness and ability borrow and pay debt. These key financial ratios cover a broad range of performance indicators including: (1) Profitability, (2) Asset Productivity, (3) Liquidity, (4) Solvency / Financial Leverage and (5) Market Value. This tutorial is the first of 5 on key financial ratios. Profitability is covered in this first one. 

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Income Statement Format

A proper income statement format comes in two varieties. The first one discussed here is the single step income statement and the second is the multiple step income statement format. There are key differences between the two and you should know when to use each for the right situation. The downloadable spreadsheet is at the end of the tutorial.

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Cash Flow Analysis

Cash flow analysis is so crucial because cash is king! When evaluating a company’s performance, most stakeholders whether internal or external, are interested in how well the company is generating cash. Having a strong grasp of cash flow analysis can give you great insights into the company’s past, present and future performance. There are a few types of cash flow analysis and in a series of tutorials we will explore the cash flow statement, cash flow ratios, discounted cash flow and free cash flow.

Relationship Between Financial Statements

Relationship Between Financial Statements

Understanding the relationship between financial statements enable you to manage business operations better. The end products of an accounting information system are the four basic financial statements that can be produced. They are :

(1) The Income Statement (2) Statement of Owner’s (Shareholder’s) Equity (3) The Balance Sheet (4) The Statement of Cash Flows

While each statement tells its own story, all four of them are connected to each other directly or indirectly. Understanding the relationship between financial statements will allow you to validate the integrity of the information provided as well as allowing you to build a better foundation for more complicated financial analysis.

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Cost Volume Profit – Breakeven Analysis

Cost-Volume-Profit analysis is used in the planning process by looking at the effects caused by varying levels of units sold, unit pricing, fixed costs and variable costs on bottom line profit. The primary objective from a managerial perspective is to maximize contribution margin (revenue less variable costs) and minimize fixed costs. In the process of planning, key stakeholders within an organization are likely to ask some very important questions such as “What’s the effect on profit if units sold decreased 3%?” “How much of an impact will a 10% price hike have on profit?” or “what’s the impact to the bottom line if variable cost per unit increased 8%?”

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The Accounting Equation

Under U.S. GAAP (generally accepted accounting principles) financial accounting revolves more or less around one very important but simple equation. And that is: