ADM 1340 Lecture Notes - Lecture 14: Gross Margin, Profit Margin, Longrun

• School: University of Ottawa
• Department: Administration
• Course: ADM 1340
• Professor: Lamia Chourou

Document Summary

Horizontal analysis (trend analysis: a technique to determine the change over time, percentage of base-period amount, percentage change for the period. Expresses each item in a financial statement as a percent of a base amount (total assets or net sales) Three types of comparisons: intracompany basis comparisons within a company, intercompany basis comparisons between one or more competitor, industry averages companies. Measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash: solvency ratios. Measure the ability of the company to survive over a long period of time: profitability ratios. Measure the earnings or operating success of a company for a given period of time. Short-term lenders and other creditors such as bankers and suppliers are particularly interested in assessing liquidity. Working capital = current assets current liabilities. Positive working capital indicates the likelihood for paying current liabilities is favourable: current ratio. Measure of short-term ability to pay obligations.