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
- 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
- Quick ratio
- Receivables turnover ratio
- Return on assets
- Return on common shareholders’ equity
- Short-term liquidity
- Times interest earned
- Trend analysis
- Vertical analysis