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About this document
- Pages
- 3 pages
- Price
- $3 one-time, yours to keep
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- Format
- Subject
- Accounting
- Module
- Week 7 · Week 7
This document explains ratio, vertical and horizontal analysis of financial statements. It shows how to use these tools to assess a company’s financial health, with examples from PepsiCo and Coca-Cola. It is for Week 7 of the ACC 280 course.
What's inside
- Ratio analysis: liquidity, profitability, solvency
- Vertical analysis: assets, liabilities, equities
- Horizontal analysis: trend analysis
- PepsiCo: current ratio, vertical and horizontal analysis
- Coca-Cola: current ratio, vertical and horizontal analysis
Who it is for: Students taking the ACC 280 course, Week 7. (Undergraduate)
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Summary
Financial statement analysis uses ratio, vertical and horizontal analysis. These tools help assess a company's financial health and performance over time.
Ratio Analysis Explained
Ratio analysis assesses a company's liquidity, profitability and solvency. It helps judge a company's performance in different areas. It can be applied to various financial items.
Vertical Analysis Explained
Vertical analysis compares balance sheet items as proportions of the total. It allows businesses of any size to compare annual changes easily. It is also known as common-size analysis.
Horizontal Analysis Explained
Horizontal analysis compares financial data over time, usually one year. It is also called trend analysis. It helps assess a company's overall success.
Examples of Analysis
The document shows how to calculate and interpret ratios, vertical and horizontal analysis. It uses PepsiCo and Coca-Cola as examples. It shows the calculations for each type of analysis.
Key terms
- Liquidity
- The ability of a company to meet its short-term obligations.
- Profitability
- The ability of a company to generate profit.
- Solvency
- The ability of a company to meet its long-term debts.
- Current Ratio
- A measure of a company's liquidity, calculated as current assets divided by current liabilities.
- Common-size analysis
- Another name for vertical analysis, comparing balance sheet items as proportions of the total.
- Trend analysis
- Another name for horizontal analysis, comparing financial data over time.
Questions this document helps with
- How do you calculate a company's current ratio?
- What does vertical analysis tell you about a company?
- How do you use horizontal analysis to assess a company's success?
Summary written with AI from the document's text.
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