Financial Analysis

Gripping IFRS

Financial Analysis and Interpretation

Chapter 25

Financial Analysis and Interpretation

Contents:

Page

1. Introduction

2. Users of financial statements

3. Inherent weaknesses in financial statements

3.1 Historical figures

3.2 Limited predictive value

3.3 Limited qualitative information

3.4 Risks are not reported

3.5 Limited comparability

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4. Techniques used in the analysis of financial statements

4.1 Overview

4.2 Statements of cash flows

4.3 Common-sized financial statements

4.3.1 Horizontal analysis

4.3.1.1 The horizontal analysis of the statement of financial

position

4.3.1.2 The horizontal analysis of the statement of comprehensive

income

4.3.2 Vertical analysis

4.3.2.1 The vertical analysis of the statement of financial position

4.3.2.2 The vertical analysis of the statement of comprehensive

income

4.4 Ratio analysis in general

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4.4.1 Profitability

4.4.2 Liquidity

4.4.3 Solvency/ structure

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5. Common-sized financial statements in more detail

Example 1: vertical and horizontal analysis

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6. Ratio analysis in more detail

6.1 Profitability ratios

6.1.1 Gross profit percentage/ margin

Example 2: Cashew-head Limited: GP percentage/ margin

6.1.2 Net profit percentage/ margin

Example 3: Cashew-head Limited: net profit percentage margin

6.1.3 Return on capital employed

Example 4: Cashew-head Limited: return on capital employed

6.1.4 Return on owners’ equity

Example 5: Cashew-head Limited: return on owners’ equity

6.1.5 Return on assets

Example 6: Cashew-head Limited: return on assets

6.1.6 Earnings per ordinary share

Example 7: Cashew-head Limited: earnings per ordinary share

6.1.7 Dividends per share

Example 8: Cashew-head Limited: dividends per ordinary share

6.1.8 Ordinary dividend payout ratio

Example 9: Cashew-head Limited: ordinary dividend payout ratio

6.1.9...