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Man Sci. Assignment 1

The document discusses methods for conducting financial statement analysis, including horizontal analysis, vertical analysis, trend analysis, and common size statements. It also discusses calculating financial ratios. Specifically, it defines horizontal analysis as comparing financial statements from different years, vertical analysis as expressing accounts as a percentage of a total, trend analysis as showing changes over several years using an index, and common size statements as expressing dollar amounts as percentages. It states that financial ratio analysis is the most common financial statement analysis method and involves comparing figures from financial statements in fractional, proportional, decimal, or percentage form.

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Jameeca Mohini
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69 views2 pages

Man Sci. Assignment 1

The document discusses methods for conducting financial statement analysis, including horizontal analysis, vertical analysis, trend analysis, and common size statements. It also discusses calculating financial ratios. Specifically, it defines horizontal analysis as comparing financial statements from different years, vertical analysis as expressing accounts as a percentage of a total, trend analysis as showing changes over several years using an index, and common size statements as expressing dollar amounts as percentages. It states that financial ratio analysis is the most common financial statement analysis method and involves comparing figures from financial statements in fractional, proportional, decimal, or percentage form.

Uploaded by

Jameeca Mohini
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Answer the following questions: 

a. How do we do Financial Statement Analysis?


1.Horizontal Analysis
2. Vertical Analysis
3. Trend Analysis
4. Common  Size Statement

b. Financial Ratios

2. Show you answer in a bond paper. HANDWRITTEN. 


3. Take a CLEAR photo of your answer, convert it to PDF format (you can download
office 360 in your phone) and upload it here in the LMS and also send it in this email as
back up bengchuagabiola@gmail.com

A. By definition Financial Statement Analysis is the process of extracting information from the
Financial Statements namely: Statement of Financial position, Statement of Comprehensive
Income, Statement of Changes in Owner’s Equity.

Listed below are the procedures to follow to produce a good Financial Statement Analysis:
1. Establish objectives of the analysis- (Own meaning)
2. Study the industry in which firm operates and relate industry climate to current and
projected economic development.
3. Develop knowledge of the firm and the quality of the management\
4. Evaluate financial statements using Horizontal Analysis, Trend Percentages, Common
size Financial Statements and Financial Ratios.
5. Summarize findings based on analysis and reach conclusions about firm relevant to the
established objectives.

1.Horizontal Analysis of Comparative Statements –also known as Increase Decrease Method. It


is putting statements in comparative form to make comparisons to see the significant changes
in financial performance of of current years and previous years if placed next to eachother.
(Example) (How do we do) p131

2. Vertical Analysis is the preparation of common size statements. It compares figures in the
Financial statements of a single period. . According to Grant (2020) from Investopedia Vertical analysis
is a method of financial statement analysis in which each line item is listed as a
percentage of a base figure within the statement. Thus, line items on an income
statement can be stated as a percentage of gross sales, while line items on a
balance sheet can be stated as a percentage of total assets or liabilities, and
vertical analysis of a cash flow statement shows each cash inflow or outflow as a
percentage of the total cash inflows.
3. Trend Analysis- also called Trend Percentages, it is the index numbers showing relative
changes in financial data resulting with the passage of time. It shows several years of Financial
data in terms of a base year.

4. Common  Size Statement- According to Cabrera…- translates peso amounts to percentages


to indicate the relative size of an item in proportion to the whole. It is also known as “Component
Percentage” or “100 percent” statements. (Example) (How do We Do)

b. Financial Ratio analysis- As there are many ways to Financial Statement Analysis, Financial
Ratio is the most applied. It is defined as the comparison in fraction, proportion, decimal or
percentage form of two significant figures from financial statements. It conveys the direct
relationship of the quantities in the Balance Sheet and Income Statement.

(how to

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