FS 3 facile aperto

The Income Statement uses total revenue as the base, while the Balance Sheet uses total assets as the base.

The purpose of preparing common-size financial statements is to report only percentages, without dollar amounts, to facilitate comparisons.

Benchmarking involves comparing a company to standards set by others in the same industry or market to drive improvement.

<p>Financial ratio analysis includes efficiency, financial strength, profitability, and investment ratios.</p> Signup and view all the answers

<p>Consistent calculation of financial ratios adds value to financial statement analysis, even with slight differences in classifications and formulas.</p> Signup and view all the answers

<p>The inventory turnover measures the number of times a company sells its average inventory during a year, indicating ease or difficulty in selling inventory.</p> Signup and view all the answers

<p>The receivable turnover is computed by dividing net sales by average net accounts receivable and measures the ability to collect cash from customers.</p> Signup and view all the answers

<p>Sales of current period + beginning period Accounts Receivable - end of period Accounts Receivable + beginning period Accounts Payable - end of period Accounts Payable + beginning period Prepaid Expenses - ending Prepaid Expenses - beginning period Expenses Payable + beginning period Expenses Payable - ending Expenses Payable + beginning period Property Taxes Payable - end of period Property Taxes Payable</p> Signup and view all the answers

<p>The current ratio measures the ability to pay current liabilities with current assets, and is calculated as $\frac{\text{current assets}}{\text{current liabilities}}$.</p> Signup and view all the answers

<p>The debt ratio shows the proportion of assets financed with debt. A ratio of 1 indicates all assets are financed with debt, while 0.50 means half the assets are financed with debt.</p> Signup and view all the answers

<p>The times-interest-earned ratio measures the number of times operating income can cover interest expense, with a high ratio indicating ease in paying interest.</p> Signup and view all the answers

<p>The return on total assets (ROA) is calculated as $\frac{\text{net profit}}{\text{average total assets}}$, measuring the company's success in using assets to earn a profit.</p> Signup and view all the answers

<p>The price/earnings ratio (P/E) shows how much an investor is willing to pay for each unit of earnings, and is widely quoted in financial statistics.</p> Signup and view all the answers

<p>The dividend yield measures the percentage of a share's market value returned annually to shareholders as dividends.</p> Signup and view all the answers

<p>The book value per ordinary share is calculated as $\frac{\text{ordinary shareholders' equity}}{\text{number of ordinary shares outstanding}}$, indicating the recorded accounting amount for each share of ordinary shares.</p> Signup and view all the answers

<p>The quick ratio, or acid-test 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>Profitability ratios show the percentage of each sales dollar earned as gross, operating, and net profit.</p> Signup and view all the answers

<p>Horizontal analysis involves studying percentage changes from year to year in financial statements. The calculation involves computing the amount of change from the base period to the next and then dividing 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>Horizontal analysis also applies to the balance sheet, revealing Nestlé's 6.38% total assets growth, with significant increases in cash and short-term borrowings.</p> Signup and view all the answers

<p>Trend analysis is a form of horizontal analysis that 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.</p> Signup and view all the answers

<p>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