FS 3 medio aperto

The debt ratio shows the proportion of assets financed with debt, calculated as total debt divided by total assets. A ratio of 1 indicates all assets are financed with debt, while 0.50 means half the assets are financed with debt.

The times-interest-earned ratio measures the number of times operating income can cover interest expense. It is calculated as operating income divided by interest expense.

Return on total assets measures the company's success in using assets to earn a profit. It is calculated as net profit divided by the average total assets.

<p>Return on equity shows the relationship between net income and ordinary shareholders' investment in the company. It is calculated as net income divided by ordinary shareholders' equity.</p> Signup and view all the answers

<p>Earnings per ordinary share indicates the amount of net income earned for each outstanding ordinary share. It is computed by dividing net income by the weighted-average number of ordinary shares.</p> Signup and view all the answers

<p>The price/earnings ratio shows how much an investor is willing to pay for each unit of earnings. It is calculated as the market price per share divided by earnings per share (EPS).</p> Signup and view all the answers

<p>Dividend yield measures the percentage of a share's market value returned annually to shareholders as dividends. It is calculated as dividends per share divided by the market price per share.</p> Signup and view all the answers

<p>Book value per ordinary share indicates the recorded accounting amount for each share of ordinary shares. It is calculated as ordinary shareholders' equity divided by the number of ordinary shares outstanding.</p> Signup and view all the answers

<p>The current ratio measures the ability to pay current liabilities with current assets, calculated as current assets divided by current liabilities. The quick ratio assesses whether a business can pay all current liabilities immediately and uses a narrower base than the current ratio.</p> Signup and view all the answers

<p>The process involves identifying cash receipts from customers and cash payments to suppliers and operating expenses. These are derived from the income statement and two balance sheets, and include adjustments for changes in accounts receivable, accounts payable, prepaid expenses, expenses payable, and property taxes payable.</p> Signup and view all the answers

<p>Cash flows from operations include cash receipts from customers, cash disbursements to suppliers, and cash disbursements on operating expenses. These are derived from sales, purchases, general expenses, prepaid expenses, expenses payable, and property taxes payable.</p> Signup and view all the answers

<p>Cash receipts from customers are calculated as sales of the current period plus the beginning period accounts receivable, minus the ending period accounts receivable.</p> Signup and view all the answers

<p>Cash payments to suppliers are calculated as purchases plus the beginning period accounts payable, minus the ending period accounts payable.</p> Signup and view all the answers

<p>The components include general expenses, prepaid expenses, expenses payable, and property taxes payable, with adjustments for changes in these accounts from the beginning to the ending period.</p> Signup and view all the answers

<p>For accounts receivable, the beginning period amount is subtracted from the sum of sales of the current period and the ending period amount. For accounts payable, the beginning period amount is added to the sum of purchases and the ending period amount.</p> Signup and view all the answers

<p>The direct method directly lists cash receipts and cash payments, while the indirect method starts with net income and adjusts for non-cash items and changes in working capital to arrive at cash flows from operating activities.</p> Signup and view all the answers

<p>Horizontal analysis involves studying percentage changes from year to year in financial statements. It calculates the amount of change from the base period to the next and then divides the change by the base-period amount.</p> Signup and view all the answers

<p>Nestlé's horizontal analysis shows a 0.77% increase in net sales and a 6.08% increase in operating profit in 2016 compared to 2015.</p> Signup and view all the answers

<p>Horizontal analysis provides a basis for understanding financial statement movements but does not explain the reasons behind specific changes.</p> Signup and view all the answers

<p>It is essential to study the notes to the financial statements to assess the likelihood of 2016 amounts repeating in the future.</p> Signup and view all the answers

<p>Trend analysis indicates the direction a business is taking by setting a base year's amounts equal to 100% and expressing subsequent years' amounts as a percentage of the base amount. Nestlé's trend analysis for operating profit over a five-year period shows fluctuations, with the lowest point at 81% in 2014 but climbing back to the same level as 2013.</p> Signup and view all the answers

<p>Vertical analysis, also known as component analysis, expresses financial statement items as a percentage of the total, which is represented as 100%. It provides insight into the relationship of financial-statement items relative to the total.</p> Signup and view all the answers

<p>These financial statement analysis techniques offer a fundamental understanding of financial statement movements and are crucial for investors and analysts.</p> Signup and view all the answers

<p>Benchmarking involves comparing a company to standards set by others in the same industry or market to drive improvement. It helps in identifying areas for improvement and setting performance targets based on industry standards.</p> Signup and view all the answers

<p>The formula for inventory turnover is $\frac{Cost of Goods Sold}{Average Inventory}$. It measures the number of times a company sells its average inventory during a year, indicating the ease or difficulty in selling inventory. A higher turnover ratio generally indicates efficient inventory management and strong sales, while a lower ratio may signal slow sales or excess inventory.</p> Signup and view all the answers

<p>The receivable turnover ratio is calculated by dividing net sales by average net accounts receivable. It measures the ability to collect cash from customers and indicates how quickly a company is collecting on its credit sales. A higher ratio suggests effective credit and collection management, while a lower ratio may signal potential issues with collecting receivables.</p> Signup and view all the answers

<p>The cash conversion cycle combines inventory resident period, receivable collection period, and payable collection period to show how long it takes for a business to sell its inventory, collect payments, and make payments to suppliers. It provides insights into the efficiency of a company's working capital management and the overall liquidity of the business. A shorter cash conversion cycle is generally favorable as it indicates quicker cash flows and better management of operating capital.</p> Signup and view all the answers

<p>The asset turnover ratio assesses the amount of resources used to generate sales or revenue, either on a total assets basis or fixed assets basis. It is calculated as $\frac{Net Sales}{Average Total Assets}$ or $\frac{Net Sales}{Average Fixed Assets}$. A higher ratio indicates that a company is using its assets efficiently to generate sales, while a lower ratio may suggest underutilization of assets or inefficiencies in sales generation.</p> Signup and view all the answers

<p>Consistent calculation of financial ratios adds value to financial statement analysis by providing reliable benchmarks for comparison. It allows for meaningful trend analysis and performance evaluation over time, even if there are slight variations in classifications or formulas. Consistency in calculation ensures accurate and reliable insights into a company's financial health and performance.</p> Signup and view all the answers

<p>Preparation of common-size financial statements involves reporting only percentages, without dollar amounts, to facilitate comparisons. It involves expressing each line item as a percentage of a base amount, such as total revenue for the income statement or total assets for the balance sheet. Common-size financial statements simplify the comparison of companies of different sizes and provide insights into the composition and relative significance of various financial components within a company's financial structure.</p> Signup and view all the answers