Archive about 'Interpretation of Financial Statements'

Du Point Model Diagram

An old but very useful strategic profit model or tool analysis is the Du Pont Model. Earlier article describe the basics of this model. Append below in a snaphot, the integration of margin management, asset management and financial management(click the image for a larger picture)
 
 
 

A Comprehensive Illustration Of Business Accounting Ratio/Financial Analysis/Interpretation Of The Financial Statement

Below is an example to illustrate the major accounting business ratio for the interpretation of the financial statement of a company. 

A Comprehensive Illustration of Major Ratios

 
Below major ratios have been computed to illustrate what we have learned from earlier articles on ratio analysis/interpretation of financial statement:-
 

 

 

Balance Sheet Of XYZ Ltd As At 31 st December [...]

What Do We Mean By Net Margin And What Is It Purpose In The Interpretation Of Financial Statement?

Question:
For 2008, the company achieved a net margin of 12.5%.
(a)  What does net margin mean?
(b)  How useful is this net margin when used for interpreting the company’s financial statement.
©   Say the company achieved 10.5% net margin in 2007 and 9.5% in 2006 so is it good or [...]

Reasons Or Causes for the changes re: increase or decrease in gross profit margin when comparing to previous accounting periods

When I analyse the gross profit margin by comparing to previous accounting period, I found that there is an increase in gross profit margin. Can you tell me what are some of the reasons for the increase in gross margin? What if it shows decrease in gross profit margin, please also give me some major [...]

Basic Understanding Of The DuPont Model/System: What is it and the benefits derived.

 
 
Below article looks at a very old & useful analytical tool often used in Ratio Analysis/Interpretation of financial statements namely the DuPont System/Model.
It explains what is this model and the benefits of using this model for ratio analysis. 

WHAT IS DUPONT SYSTEM/MODEL

1. The DuPont System was developed by DuPont Corporation to dissect a firm’s financial statement, [...]

What Are The Differences Between Terms Like Gross Profit, Gross Margin, Gross Profit Percentage(%), Gross Profit Margin Or Gross Profit Rate?

Is there a difference when we use terms like gross profit, gross margin, gross profit %. gross profit margin or gross profit rate?

Answer:

It is interesting to note that some of us still use the above terms interchangeably.

However, take note that:

Gross Profit is an ABSOLUTE term which is simply:
[ Gross Profit = [...]

Answer To True Or False Question On Financial Statement Analysis/Ratio Analysis

Answer to True Or False Question On Interpretation Of Financial Statement or Ratio Analysis

True

False

1.

Financial statements that reflect financial data for two or more periods are often referred to as comparative statements

X

2.

Development of data that measure changes occurring from one accounting period to another is a form [...]

True Or False Question On Financial Statement Analysis/Ratio Analysis

Append below true and false questions on Financial Statement Analysis or Interpretation Of Financial statements:

True

False

1.

Financial statements that reflect financial data for two or more periods are often referred to as comparative statements

2.

Development of data that measure changes occurring from one accounting period to another [...]

Listing Of All Topics Under Interpretation Of Financial Statements

Append below a summary of articles on business accounting ratio analysis:
 

BUSINESS RATIO ANALYSIS

Ratio analysis-Frequently Asked Questions

Table/Summary Of Financial Accounting Ratio Analysis

What Is Capital Employed

Undercapitalization or overtrading and its tell tale/signs/symptoms

Overcapitalization and its tell tales/signs/symptoms

Proprietary Ratio

PROFITABILITY Ratio

Return On Assets

Net Profit Margin or Net Profit % over Sales

Gross Profit Margin or Gross Profit % over Sales

What is [...]

Table: Summary Of Financial Accounting Ratio Analysis

SUMMARY OF FINANCIAL ACCOUNTING RATIO

PROFITABILITY RATIO:

Financial Ratio
Formula
Measurements

Return on Total Assets
Operating profit before income tax + interest expense/ Average total assets
Measures rate of return earned through operating total assets provided by both creditors and owners

Return on ordinary shareholders’ equity
Operating profit & extraordinary items after income tax minus Preference dividends /  Average ordinary shareholders’ equity
Measures rate of [...]