Financial Statement Analysis: Quantitative Techniques-Analyzing Liquidity, Profitability, and Asset Utilization (Portfolio 5133)
This Portfolio explains how analysts and other users of financial statements employ various qualitative techniques to improve the usefulness of the information in those statements.
Tax Portfolio 5133-2nd, Financial Statement Analysis: Quantitative Techniques-Analyzing Liquidity, Profitability, and Asset Utilization (Accounting Policy and Practice Series), explains and illustrates how users of financial statements can employ a wide variety of quantitative techniques to improve the usefulness of the information contained in those statements. This work complements Tax Portfolio 5134-2nd, Financial Statement Analysis: Quantitative Techniques-Analyzing Solvency, Price Multiples, and Cash Flow (Accounting Policy and Practice Series), as well as other Portfolios in the Accounting Policy and Practice Series that focus on specific accounting subjects.
The three major categories of quantitative techniques discussed in this Portfolio are:
- trend analysis, which analysts use to identify changes in financial statement and related information within an organization over time;
- common-size analysis, which helps analysts compare an organization’s financial position and performance with those of other organizations and with industry or sector benchmarks; and
- ratio analysis, which allows analysts to examine various relationships among financial statement items and related information.
The Portfolio explains and illustrates how analysts employ those techniques to meet the objectives of analyzing an organization’s (1) liquidity or short-term solvency, (2) profitability (which focuses on the organization’s ability to generate revenues and control costs), and (3) asset utilization and efficiency (with particular emphasis on specific operating assets, such as receivables, inventories, and long-term fixed assets). This Portfolio’s Worksheets contain sample disclosures of financial statement information and quantitative analyses.
The Portfolio contains numerous examples of questions that various types of financial statement users address during quantitative financial statement analyses. A complete financial statement analysis, however, requires using qualitative techniques to more fully assess an organization’s actual financial position and performance and more accurately forecast the organization’s value. Tax Portfolio 5122-2nd, Financial Statement Analysis: Qualitative Techniques (Accounting Policy and Practice Series), describes and illustrates those qualitative techniques.
This Portfolio may be cited as Tax Portfolio 5133-2nd, Glazer and Stevens, Financial Statement Analysis: Quantitative Techniques-Analyzing Liquidity, Profitability, and Asset Utilization (Accounting Policy and Practice Series).
Table of Contents
I. Objectives and Scope of Portfolio
II. Quantitative Techniques Used in Financial Statement Analysis
III. Liquidity Analysis
IV. Profitability Analysis
V. Asset Utilization and Activity (Efficiency) Analysis
Stager Professor of Business
Franklin and Marshall College
Professor of Finance
University of Maryland University College