Growth Ratios

One method of Financial Ratio Analysis, Cost Growth Ratios measurethe change in the economic status of a firm over a period of time

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1. Basic Earnings per Share (BEPS)

   FORMULA	SIGNIFICANCE
   Income Available to Common Stockholders Average Common Shares Outstanding	Reflect the company's earning power (i.e. its ability to generaqte income from normal operations).

Cost Management Ratios

One method of Financial Ratio Analysis, Cost Management Ratios measures how well is the control of the company's cost.

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1. Gross Profit Rate (or Gross Profit Percentage)

   FORMULA	SIGNIFICANCE
   Net Sales - Cost of Sales Net Sales	Measures how much can be spent for marketing, R&D, and administrrative costs while still reaching target income.

Profitability Ratios

Firms or companies' Profitability Ratios measure earnings in relation to some base such as capital, sales or assets.

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There are nine (9) types of ratios covered.

1. Profit Margin on Sales (or Net Profit Percentage)

   FORMULA	SIGNIFICANCE
   Net Income Net Sales	Measures the percentage of net income to sales

Asset Management Ratios

Firms or companies measure on how it uses its asset to generate revenue and income using Asset Management Ratios

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There are eleven (11) types of ratios covered.

1. Finished Goods or Merchandise Inventory Turnover

   FORMULA	SIGNIFICANCE
   Cost of Sales Average Inventory	Shows if the firm holds excessive stocks of inventories that are unproductive and that lessen the company's profitability.

Leverage Ratios

One method of Financial Ratio Analysis, Leverage Ratios measure the company's use of debt to finance its operations and assets.

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• Financial Leverage - also known as trading on the equity, this is the use of debt to finance the company's operations and assets.; It is advisable to trade on equity when earnings from borrowed funds exceed the cost of borrowing.

Liquidity Ratios

One method of Financial Ratio Analysis, Liquidity Ratios provides information about the company's ability to pay its current obligations and continue operations.

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Discussed here are the five (5) different yet complementary types of liquidity ratios including their variations, formula and significance.

Techniques Used in Financial Statement Analysis

This article presents the five (5) general techniques used in the analysis and evaluation of financial statements.

1. Horizontal Analysis
Horizontal analysis involves comparison of figures shown in the financial statements of two or more consecutive periods. The difference of the figures between the two periods is calculated. Using the earlier period as the base, the percentage change is calculated.

Formula (click on the image to zoom):

Financial Statement Analysis and Interpretation

What is Financial Statement (FS) Analysis?
Financial statements contains data that if carefully selected, an assessment and evaluation can be made on firm's past performance, its present condition and business potential in the future.

Its primary purpose is to check and forecast the firm's financial health, its strength and weaknesses and its:

• profitability
• ability to meet obligations
• safety of investment in the bisuness
• management effectiveness in running the firm.