Financial Statement Analysis

Flashcards for key concepts in financial statement analysis, covering definitions and methods used for analysis.

Financial Statement Analysis

The process of evaluating the relationships between financial statement items to understand a company's performance.

Internal Users

Individuals within the organization, such as management, who utilize financial statements for planning and control.

External Users

Individuals or entities outside the organization, such as investors and creditors, who assess the company's performance through its financial statements.

Horizontal Analysis

A method of comparing financial data over different periods to identify trends or changes.

Vertical Analysis

A method of analyzing financial statements by expressing each item as a percentage of a base figure, such as total assets or total revenue.

Common-Size Statements

Financial statements that present all items as percentages rather than absolute dollar amounts.

Trend Percentages

A method of showing changes over time in financial statement items to evaluate performance over multiple years.

Ratio Analysis

The evaluation of the relationships between different items in financial statements, often expressed as a fraction or percentage.

Dollar Change

The difference in financial metric values between two periods, calculated as Current Year Figure minus Base Year Figure.

Percentage Change

The change in a financial metric expressed as a percentage of the base year figure, calculated as (Dollar Change / Base Year Figure) x 100.

Trend Index

A method of expressing the change in a financial metric over time, setting the first period as 100% and comparing subsequent periods to it.

Converting Historic Dollars to Current Dollars

The process of adjusting previous period figures for inflation or deflation to reflect current price levels.