Financial statement analysis and interpretation
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Contents

  • Introduction
  • Learning outcomes
  • 1 The need for interpretation of financial statements
    • 1.1 Extracting meaningful information
  • 2 Types of financial statement analyses
    • 2.1 The case of a fictitious company
  • 3 Information needs of different stakeholder groups
    • 3.1 Who needs ratios? The external stakeholders’ perspective
    • 3.2 Who needs ratios? The manager’s perspective
  • 4 What is ratio analysis?
    • 4.1 Benefits of ratio analysis
  • 5 Categories of ratios
    • 5.1 Profitability ratios
      • 5.1.1 Sales growth
      • 5.1.2 Gross profit margin
      • 5.1.3 Return on sales
      • 5.1.4 Expense analysis
      • 5.1.5 Return on capital employed
    • 5.2 Liquidity ratios
      • 5.2.1 Working capital
      • 5.2.2 Current ratio
      • 5.2.3 Acid test ratio
    • 5.3 Solvency ratios
      • 5.3.1 Debt ratio
      • 5.3.2 Leverage
      • 5.3.3 Gearing ratio
      • 5.3.4 Interest cover
    • 5.4 Efficiency ratios
      • 5.4.1 Asset utilisation ratio
      • 5.4.2 Inventory days
      • 5.4.3 Receivables collection period
      • 5.4.4 Payables payment period
  • Conclusion
  • Acknowledgements

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