tailieunhanh - Lecture Principles of accounting (2005): Chapter 18 - Needles, Powers, Crosson

Chapter 18 - Financial performance evaluation. This chapter explains the objectives and techniques of financial statement evaluation from the standpoint of the financial analyst. It summarizes all the ratios presented thus far in the book, using a comprehensive financial analysis of Sun Microsystems Inc. | Financial Performance Evaluation Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 18 18– Learning Objectives Describe and discuss financial performance evaluation by internal and external users. Describe and discuss the standards for financial performance evaluation. Identify the sources of information for financial performance evaluation. 18– Learning Objectives (cont’d) Apply horizontal analysis, trend analysis, vertical analysis, and ratio analysis to financial statements. Apply ratio analysis to financial statements in a comprehensive evaluation of a company’s financial performance. 18– Financial Performance Evaluation by Internal and External Users Objective 1 Describe and discuss financial performance evaluation by internal and external users 18– Financial Performance Evaluation by Internal and External Users Financial performance evaluation Also called financial statement analysis Shows important relationships in the financial . | Financial Performance Evaluation Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 18 18– Learning Objectives Describe and discuss financial performance evaluation by internal and external users. Describe and discuss the standards for financial performance evaluation. Identify the sources of information for financial performance evaluation. 18– Learning Objectives (cont’d) Apply horizontal analysis, trend analysis, vertical analysis, and ratio analysis to financial statements. Apply ratio analysis to financial statements in a comprehensive evaluation of a company’s financial performance. 18– Financial Performance Evaluation by Internal and External Users Objective 1 Describe and discuss financial performance evaluation by internal and external users 18– Financial Performance Evaluation by Internal and External Users Financial performance evaluation Also called financial statement analysis Shows important relationships in the financial statements and relates them to important financial objectives Users of financial statements fall into two broad categories Internal users External users 18– Internal Users Management Uses financial performance evaluation in all stages of the management cycle Primary objective Increase the wealth of the owners or stockholders of the business 18– Internal Users (cont’d) Management's primary objective divided into categories Liquidity Ability to pay bills when due and to meet unexpected needs for cash Profitability Ability to earn a satisfactory net income 18– Internal Users (cont’d) Management's primary objective divided into categories Long-term solvency Ability to survive for many years Cash flow adequacy Ability to generate sufficient cash through operating, investing, and financing activities Market strength Ability to increase the wealth of owners 18– External Users Creditors Make loans in the form of trade accounts, notes, or bonds Investors Buy capital stock, from .