BUSS1030 Lecture Notes - Lecture 9: Financial Statement, Operating Cash Flow, Gross Margin
27 Jul 2018
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Document Summary
Lecture 9 analysis and interpretation of financial statements. Provide a quick and simple means of examining the financial health of a business when can be used as a benchmark for comparisons with other businesses. Simply express the relationship between one figure appearing in the financial statements and some other, e. g. profit in relation to capital employed. Are simple to calculate, and a good picture can be built up with just a few ratios, however ratios can be difficult to interpret. They highlight the financial strengths and weaknesses of a business but cannot by themselves explain why certain strengths/weaknesses exists or why changes have occurred. Ratios can be used to compare businesses through comparisons and overcomes the differences of scale of operations which is often a problem. i. e. just looking at profits of each business may be misleading due to size. Investment measure of the returns and performance of shares held by a business from investors perspective.
