Acct u1 class 1

Stock Price Influences

  • Market Dynamics

    • Stock prices are influenced by buyer and seller actions.

    • Companies must release financial reports regularly (8K for quarterly updates, 10K for annual reports).

    • Strong financial performance generally drives stock prices up, while poor performance drives prices down.

  • Perception

    • Perception can be a major driving force behind stock prices.

    • Example: Budweiser's share price plummeted not due to operational changes but due to public perception.

    • Indicates that stock prices can be affected as much by public sentiment as by financial performance.

Financial Statements Overview

  • Income Statement

    • Contains revenues and expenses.

    • Provides a simplified view of a company's performance over a specific period.

  • Statement of Shareholders' Equity

    • Reflects changes in share prices over time including dividends.

    • Shows how equity has changed for shareholders between periods.

  • Cash Flow Statement

    • Focuses on cash inflows and outflows, differentiating it from the income statement.

    • Cash flow indicates liquidity based on actual cash transactions as opposed to accounting statements that may include non-cash items.

    • Critical for assessing how successfully a business manages cash.

Analysis Standards

  • Intra-Company Analysis

    • Compares performance across various departments within the same company (e.g., comparing Macy's different departments).

  • Competitor Analysis

    • Evaluates performance against direct market competitors (e.g., HEB vs. Kroger).

  • Industry-Wide Analysis

    • Considers industry benchmarks and comparisons (e.g., sections similar to HEB looking at other stores like Walmart).

  • Guidelines Analysis

    • Relies on the external legal framework (i.e., FDA for grocery stores) to ensure companies adhere to necessary regulations.

Financial Analysis Techniques

  • Horizontal Analysis

    • Involves comparison of financial data across different time periods.

    • Useful for identifying trends and assessing performance over fiscal years.

    • Dollar Change Calculation: Subtraction of current year figure from previous year.

    • Percent Change Calculation: (Dollar Change / Base Amount) x 100.

  • Vertical Analysis

    • Compares line items within the same year as a percentage of a base figure (e.g., total assets or total revenues).

    • Common size analysis: Expressing each line item as a percentage of total assets or total revenues to gauge relative size.

  • Ratio Analysis

    • Liquidity Ratios: Measures the ability to meet short-term obligations.

      • Current Ratio: Current Assets / Current Liabilities.

      • Accounts Receivable Turnover: Sales / Average Accounts Receivable.

      • Inventory Turnover: Cost of Goods Sold / Average Inventory.

      • Total Asset Turnover: Sales / Total Assets.

    • Solvency Ratios: Assesses the ability to meet long-term obligations.

      • Debt Ratio: Total Liabilities / Total Assets.

      • Equity Ratio: Total Equity / Total Assets.

      • Debt-to-Equity Ratio: Total Liabilities / Total Equity.

      • Times Interest Earned: EBIT / Interest Expense.

    • Profitability Ratios: Measures the ability to generate profit relative to sales, assets, or equity.

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