Financial Analysis
Suppose you are comparing two firms within an industry. One is large and the other is small. Will relative or absolute numbers be of more value in each case? What kinds of statistics can help evaluate relative size?
Gibson, Charles H. (2012-05-10). Financial Reporting and Analysis (Page 217). Cengage Textbook. Kindle Edition.
When comparing two firms that are unequal in size, the relative financial ratios are more appropriate for any type of comparison. The advantage of using ratios is that they represent a metric that can be easily compared with industry standards or other specific companies of different sizes. The financial statement represents a snap shot of a company's performance over a given time period and the financial information that these reports provide can allow the analysis of a wide range of different ratios. These ratios can provide insights to factors such as the company's ability to repay short- and long-term liabilities, information about the debt structure, and information about the capital structure that the company is operating with along with various profitability metrics.
Chapter 6
Problem 6-11
Q 6-11 List the two computations that are used to determine the liquidity of inventory.
Gibson, Charles H. (2012-05-10). Financial Reporting and Analysis (Page 249). Cengage Textbook. Kindle Edition.
The operating cycle for a company is the time period between the acquisition of goods and the final cash realization resulting from sales and subsequent collections.
Inventory Turnover
Inventory turnover indicates the liquidity of the inventory. This computation is similar to the accounts receivable turnover computation.
The inventory turnover formula follows:
Inventory Turnover = Cost...
(2009). Google's Big IPO, Five Years Later. [Article]. Wall Street Journal - Eastern Edition, 254(40), C3. Davis, H.Z., & Peles, Y.C. (1993). Measuring Equilibrating Forces of Financial Ratios. The Accounting Review, 68(4), 725-747. Google Inc. (2012). 2011 Annual Report. Mountain View, CA: Google Inc. Kirby, J. (2009). How Google really does it. (Cover story). [Article]. Canadian Business, 82(18), 54-58. Lee, M.-j. (2010). Measuring the Usage Effects of Tying a Messenger to Windows: A
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