Financial Performance
Financial Statements
- Income
Statement
- The income statement includes information on the following four activities: (1) Sales,
(2) Production Costs, (3) Marketing and Distribution Costs, and (4) Financing Costs
- Balance Sheet
- The balance sheet includes information on the following three categories: (1) Current
Assets, (2) Fixed or Long-Term Assets, and (3) Other Assets.
- Cash
Flow Statement
- Cash Flow Statements include: (1) Cash Flow from Operations, (2) Investment Flows, and
(3) Financing Transactions.
Financial
Ratios
Financial ratios restate the data from the financial statements in
relative terms. This restatement allows the corporate ratios to be examined across time to
identify trends; it also allows the corporation's ratios to be compared to other
corporations' ratios or to industry ratios. Information on corporate and industry ratios
is provided by firms such as Dun & Bradstreet and Robert Morris Associates.
Selected data is also available in the Wall Street Journal Briefing
Books.
The financial ratios can be categorized as follows:
- Liquidity
- Liquidity measures are designed to indicate the firm's ability to meet debt and other
obligations.
- Profitability
- Profitability measures are designed to indicate how efficient the firm is in generating
profits from it assets.
- Financial Leverage
- The finance measure is designed to indicate how levered the firm is.
- Return on Equity
- The return on equity measure is designed to indicate how well investors are doing
relative to other stock.
Modified Du Pont Analysis
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