SOCSCI 2AC3 Lecture Notes - Lecture 4: Financial Statement, Gross Profit, Net Income

• School: McMaster University
• Department: Social Sciences
• Course: SOCSCI 2AC3
• Professor: Carlo Avolio

Document Summary

Creditors (someone we own money to) (l : liability) concerned w : ability to say, value of security, compliance w covenants. Investors concerned w everything: predict future cash flows & earnings to evaluate ability to pay dividends or meets obligations. Liabilities means creditors and expenses means equity. Horizontal trend analysis comparing results across time, changes over time. Vertical analysis common-size analysis, examines relationships on the same financial statement. Ratio analysis examines relationships among various items. Any analysis must help users understand and evaluate financial results. Comparing results across time, often expressing changes in account balances as a percentage of prior year balances. Compare one yr to the next yr across time look at figures as they roll out across time. Expressing each financial statement amount as a percentage of another amount on the same financial statement. On a balance sheet total asset = 100%. On an income statement net sales = 100%.