Final Account and Analysis

Better Essays

Delta Publishing Company



DELTA PUBLISHING COMPANY P.O. Box 5332, Los Alamitos, CA 90721-5332

All rights reserved. No part of this course may be reproduced in any form or by any means, without permission in writing from the publisher.

2006 by


Table of Contents
Preface Chapter 1 Objectives of Financial Statement Analysis and Financial Reporting Chapter 2 Accounting Assumptions, Principles, Procedures, and Policies Chapter 3 Understanding Financial Statements Chapter 4 An Overview of Financial Statement Analysis Chapter 5 Analysis of Liquidity and Activity Chapter 6 Analysis of Solvency and Capital Structure Chapter 7 Profitability Analysis Chapter 8
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What difference will it make to investors and creditors if after the acquisition the acquiring company has long-term liabilities exceeding $4 billion and equity of about $500 million? Will the company be able to cover the debt service? How can you know? How significant will the next several interim financial statements be? What is the current position of this company? Some companies in the past used leverage advantageously. In a similar situation, a major retailer filed under the bankruptcy laws. The company’s stock currently trades at about 6.5 time earnings. What factors entered into this price-earnings ratio? Consider the two cases which have just been presented. If you were an investor in these companies, how would you evaluate this information? What action might you take? Are there any significant factors about the financial statements of these companies you might want to examine more thoroughly? To interpret this information, a serious investor or creditor must be able to read, interpret, and analyze financial statements.


FOCUS OF FINANCIAL STATEMENT ANALYSIS Financial statement analysis is a process which examines past and current financial data for the purpose of evaluating performance and estimating future risks and potential. Financial statement analysis is used by investors, creditors, security analysts, bank lending officers, managers, taxing authorities, regulatory agencies, labor unions, customers,
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