Vertical Analysis
This analysis expresses income statement items as a percentage of this base.
What is Net Sales
Horizontal analysis compares data across this dimension.
What is time?
These users—shareholders and lenders—use FSA to decide whether to invest or loan.
Who are external users?
This ratio measures the net income earned on each dollar of sales.
What is Profit Margin?
This ratio measures how effectively a company uses assets to generate sales.
What is asset turnover?
Balance sheet items in vertical analysis are expressed as a percentage of this.
What is Total Assets
To compute the percent change, you divide by this amount
What is base year amount?
This group uses FSA to improve efficiency and operational decisions.
Who are internal users (managers)?
This ratio measures income earned for each dollar in stockholders’ equity.
What is ROE
This credit risk ratio compares current assets to current liabilities.
What is the Current Ratio?
A company has Operating Expenses of $40,000 and Net Sales of $200,000. The common-size percentage is this.
What is 20%
Sales increased from $500,000 to $575,000. The percent change is this.
What is 15%
These general-purpose statements are the most common tools for analysis.
What are financial statements (Income Statement, Balance Sheet, etc.)?
This ratio shows the share of each sales dollar remaining after covering cost of goods sold.
What is Gross Profit Ratio?
This ratio measures how many times inventory is sold during the year.
What is Inventory Turnover?
Vertical analysis helps identify these two categories of financing on the balance sheet.
What are current vs. noncurrent liabilities (and equity)?
This special form of horizontal analysis highlights patterns over multiple years.
What is trend analysis
Comparing a company’s results to other firms in the same industry is this type of comparison.
What is competitor analysis?
If a company has net income of $20,000 and average assets of $200,000, this ratio equals 10%.
What is Return on Assets?
This liquidity ratio indicates the number of days it takes to collect from customers.
What is the Average Collection Period?
Noticing rising COGS as a percentage of sales using vertical analysis indicates this operational issue.
What is weakening cost control?
A company’s total liabilities increased from $60,000 to $81,000. The percent increase is this.
What is 35%
Standards based on long-term experience and common benchmarks are known as these.
What are guidelines (rules of thumb)?
A higher profit margin generally indicates better control of these two areas.
What are costs and pricing strategy?
A company with high interest-bearing debt relative to equity has a high value for this risk ratio.
What is Debt-to-Equity?