ACC FINALS

Finance 

• Management of money and includes activities such as investing, borrowing, lending, budgeting, saving, and forecasting 

•  Tools and instruments people use in relation to money and the systems and institutions through which activities occur. 

Finis

means ‘end’ in latin

future

• Forward-looking and values comes from the _____

  • Handle money for future purposes

• Looks at how companies generates and uses cash effectively 

Accounting 

• Provides information using past and present financial data 

  • Kung walang financial data in the past and present, wala tayong i-aaccount

• Looks on what  company owns (assets), what it owes (liability) and residual (equity) that belongs to owner

Liquidity

• assets are enough para bayaran yung current liabilities

Solvency

• assets are enough para bayaran yung long-term non-current liabilities

horizontal, vertical, ratio

the 3 tools of financial statement analysis

Horizontal Analysis

two or more consecutive

earlier period

trend ratios and percentages

____________ involves comparing figures in the financial statements of ______________ periods.

• The difference between the amounts of the two periods and the percentage change from one period to the next, using the __________ as the base, are computed

• Also called as "__________".

• Example: 2023: 100,000 | 2024: 80,000 

difference: y2 - y1

percentage: y2 - y1 / y1 = %

horizontal formula

Vertical Analysis

single period

total asset

net sales

"common-size statements".

______________ - involves comparing figures in the financial statements or a

• Each figure in the statement of financial position is expressed as a percentage of ____________(100%) while in the financial performance, every amount is expressed as a percentage of ___________  (100%)

Also called as " ".

• Financial position item (ex: inventory) / TOTAL ASSETS

• Financial performance item (ex: COGS) / NET SALES

vertical analysis formula

ratio analysis

____________________- evaluates a comprehensive range of financial relationships representing different aspects of an entity’s activities 

• liquidity ratio - interested users, short term creditors

• activity or efficiency ratio

• solvency ratio - long term creditors

• profitability - potential investors

Current Ratio

1. indicates the number of times that the current liabilities could be paid within the available current assets 

• The higher the current ratio, the more liquid the company 

• Working capital ratio or banker’s ratio 

quick ratio/ acid test ratio

Cash, trading securities, accounts receivable (mabilis gawing cash) 

total asset turnover

higher

 indicates how efficiently an entity uses its assets to generate sales 

• The ______ total asset turnover, the more efficient the company’s asset is used 

Debt to Total Asset

• Debt Ratio

higher

less

indicates the percentage of total assets provided by creditors 

 

• The ______ the debt ratio, the greater its financial leverage or the _____ solvent the company is

Equity Ratio

higher

__________ indicates the percentage of total assets provided by owners 

• _______ equity ratio suggests a more financially stable company, as it relies less on debt financing 

• Proprietary ratio

Profit Margin on Sales

higher

________indicates the percentage of each peso of sales that result in profit 

• Net profit margin, net profit ratio, return on sales or profit margin/profit ratio. 

The ________ the ratio, the more profitable the company is.

Return on Equity

higher

1. provides a simple metric for evaluating investment returns 

• Return on Investments 

• The ______ the ROE, the more efficient the company is at generating income and growth from its equity financing 

a method of financial analysis that involves comparing data over several accounting period

horizontal analysis

false, ave equity

in computing return on equity, we usually divide Net income from shareholder’s equity multiply by 100 to get the percentage

vertical analysis

a method of financial analysis in which each line item is listed as a percentage of a base figure within the statement

liquidity ratio

it is a kind of ratio analysis wherein it measures the firm’s ability to meet the current short term obligations

efficiency

it means accomplishing something at the least cost

ratio analysis

false

activity ratio

solvency

profitability