Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Introduction to Ratios

Financial Accounting

14. Financial Statement Analysis

Introduction to Ratios

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Multiple Choice

Instead of using financial ratios, what is another common method to compare the financial performance of companies?

Preparing a bank reconciliation statement

Horizontal analysis (trend analysis)

Recording adjusting journal entries

Calculating the weighted average cost of capital

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Verified step by step guidance

Understand the concept of comparing financial performance: Financial performance comparison involves analyzing and interpreting financial data to assess a company's profitability, efficiency, and overall health.

Learn about horizontal analysis (trend analysis): Horizontal analysis is a method of comparing financial data over multiple periods to identify trends, growth patterns, or changes in performance. It focuses on the percentage change in financial statement items over time.

Differentiate horizontal analysis from other methods: Unlike financial ratios, which provide a snapshot of performance, horizontal analysis emphasizes changes over time. It is not related to preparing bank reconciliation statements, recording adjusting journal entries, or calculating the weighted average cost of capital.

Apply horizontal analysis: To perform horizontal analysis, calculate the percentage change for each financial statement item between two periods using the formula: \( \text{Percentage Change} = \frac{\text{Current Period Value} - \text{Previous Period Value}}{\text{Previous Period Value}} \times 100 \).

Interpret the results: Use the calculated percentage changes to identify trends, such as revenue growth, expense reduction, or changes in net income, and compare these trends across companies to evaluate their financial performance.