Chapter  14
              Financial Statement 
                     Analysis
                Financial Accounting, IFRS Edition
                Weygandt   Kimmel   Kieso 
                   Study Objectives
                    Study Objectives
                     1.  Discuss the need for comparative analysis.
                     2.  Identify the tools of financial statement analysis.
                     3.  Explain and apply horizontal analysis.
                     4.  Describe and apply vertical analysis.
                     5.  Identify and compute ratios used in analyzing a firm’s liquidity, 
                         profitability, and solvency.
                     6.  Understand the concept of earning power, and how 
                         discontinued operations are presented.
                     7.  Understand the concept of quality of earnings.
                      Financial Statement Analysis
                       Financial Statement Analysis
                     Basics of 
                     Basics of         Horizontal and                       Earning Power 
                     Financial         Horizontal and                       Earning Power     Quality of 
                     Financial         Vertical          Ratio Analysis     and Irregular     Quality of 
                     Statement         Vertical          Ratio Analysis     and Irregular     Earnings
                     Statement         Analysis                             Items             Earnings
                     Analysis          Analysis                             Items
                     Analysis
                      Need for           Statement of      Liquidity         Discontinued       Alternative 
                      comparative        financial         Profitability     operations         accounting 
                      analysis           position          Solvency          Changes in         methods
                      Tools of           Income            Summary           accounting         Pro forma 
                      analysis           statement                           principle          income
                                         Retained                            Comprehensive      Improper 
                                         earnings                            income             recognition
                                         statement
                  Basics of Financial Statement Analysis
                  Basics of Financial Statement Analysis
                   Analyzing financial statements involves:
                     Characteristics       Comparison           Tools of 
                                           Bases                Analysis
                       Liquidity            Intracompany          Horizontal
                       Profitability        Industry              Vertical
                       Solvency             averages              Ratio
                                            Intercompany 
                                   SO 1    Discuss the need for comparative analysis.
                                   SO 2    Identify the tools of financial statement analysis.