Unit 11 Study Guide: Using Managerial Accounting: Trends and Ratios

11a: Perform trend analysis to evaluate financial statement information.

    • Define trend analysis with income statement and balance sheet accounts.

Review Trend Analysis of Financial Statements from Managerial Accounting.

11b: Perform common-size analysis to evaluate financial statement information.

    • Define common-size analysis.
    • How do managers use common-size analysis to analyze trends within a company?
    • How do managers use common-size analysis to study competitors?

A common-size analysis of an income statement reports income statement accounts as a percentage of net sales. A common-size analysis of a balance sheet report balance sheet accounts as a percentage of total assets.

Review Common-Size Analysis of Financial Statements from Managerial Accounting.

11c: Use ratio analysis to measure profitability, short-term liquidity, long-term solvency, and market valuation.

Profitability ratios focus on the income statement.

    • Define gross margin ratio.
    • Define profit margin ratio.
    • How do managers calculate return on assets?
    • How do managers calculate return on common shareholders’ equity?
    • How do managers calculate earnings per share?

Short-term liquidity ratios focus on the short-term liabilities.

    • Define the current ratio.
    • Define the quick ratio.
    • Define the receivables turnover ratio.
    • How do managers calculate the average collections period?
    • How do managers calculate the inventory ratio.
    • Describe how to calculate the average sales period.

Long-term solvency ratios focus on long-term liabilities.

    • Define the debt-to-assets ratio.
    • Define the debt-to-equity ratio.
    • How do managers calculate times interest earned?

Market valuation measures focus on the value of the company.

    • How do managers calculate market capitalization.
    • How do managers calculate price-earnings ratio.

Review Ratio Analysis of Financial Information from Managerial Accounting.

11d: Develop and analyze non-financial performance measures using a balanced scorecard.

    • Identify measures that evaluate financial performance.
    • Identify measures that evaluate the efficiency of business processes.
    • Identify measures that track employee learning and growth.
    • Identify measures that track customer relationships.

Review Non-financial Performance Measures: The Balanced Scorecard from Managerial Accounting.

Review a sample balanced scorecard in Table 13.4 Balanced Scorecard Measures.

Unit 11 Vocabulary

      • Average collection period
      • Average sales period
      • Balanced scorecard
      • Base-year
      • Common-size analysis
      • Current ratio
      • Debt-to-assets ratio
      • Debt-to-equity ratio
      • Earnings per share
      • Financial leverage
      • Gross margin ratio
      • Inventory turnover ratio
      • Long-term solvency
      • Market capitalization
      • Market valuation
      • Percent change
      • Price earnings ratio
      • Profit margin ratio
      • Profitability
      • Quick ratio
      • Receivables turnover ratio
      • Return on assets
      • Return on common shareholders’ equity
      • Short-term liquidity
      • Times interest earned
      • Trend analysis
      • Vertical analysis
Last modified: Wednesday, July 17, 2019, 5:45 PM