FINANCIAL STATEMENT ANALYSIS （财务报表分析）.pdf

Fundamentals, Techniques Theory FINANCIAL STATEMENT ANALYSIS CHAPTER TWO FINANCIAL STATEMENT ANALYSIS CALCULATION OF FINANCIAL RATIOS “Patience is the best remedy for every trouble.” Plantus, Titus Maccius (c. 254- 184 B.C.) “Be not afraid of going slowly; be only afraid of standing still.” Chinese Proverb Observation Financial statement analysis is one of the most important steps in gaining an understanding of the historical, current and potential profitability of a company. Financial analysis is also critical in evaluating the relative stability of revenues and earnings, the levels of operating and financial risk, and the performance of management. Common size financial statements are an important tool in financial statement analysis. This Chapter explains the calculation and interpretation of common size balance sheets as well as common size income statements. This Chapter also defines a wide variety of ratios derived from financial statement information. The ability to calculate, compare and interpret these financial ratios is a key learning objective of this chapter. I. FINANCIAL RATIO (TREND) ANALYSIS SUMMARY In general, a thorough financial analysis of any business would include a study of the following financial information: 1. A summary of both the historical and the adjusted economic/normalized balance sheets over the period 1 being analyzed, detailing each balance sheet line item. 2. A summary of both the historical