# Ch 9: Basics of Financial Statement Analysis

In these informative lessons, discover how to gather data from financial statements to perform analyses using several different formulas. Through a variety of study aids, our instructors show you the applications of this data analysis.

## Basics of Financial Statement Analysis - Chapter Summary and Learning Objectives

Financial statements act as a record of data, and if this data is plugged into different formulas, organizations can more accurately determine their overall business costs, risks, and financial futures. These lessons will help you develop a basic understanding of how to interpret financial statements as well as how to analyze the data to make further calculations. This chapter has been constructed to teach you about the following:

• The elements of financial statements and analysis limitations
• Interest ratios for both short-term and long-term creditors
• Formulas for determining different ratios, turnover rates, and other variables
• Examples and uses of a value chain

Lesson Objective
Financial Statement Analysis: Definition, Purpose, Elements & Examples List the four most used financial statements, explain the process of financial statement analysis, define the different types of ratios, and explain how each ratio is used.
Limitations of Financial Statement Analysis Identify these limitations and discuss how they impede the analysis process.
How to Calculate Earnings Per Share: Definition & Formula Explain the following terms: price-earnings ratio, yield ratios, dividend payout, return on common stockholder's equity, and earnings per share; identify the ratio of interest for each stockholder as defined in the ratio analysis; and, practice these earnings calculations with the given formula.
Ratios of Interest to the Short-Term Creditor Break down this concept in relation to accounts receivable turnover and working capital.
Current Ratio in Accounting: Definition, Formula & Analysis Point out how to determine current assets and current liabilities, practice using the current ratio formula of current assets divided by current liabilities, and run formula analyses on sample problems.
What Is Inventory Turnover? - Definition, Formula & Calculation Explore calculations to determine the cost of goods sold, identify how to measure the average inventory, and practice the formula for finding inventory turnover by dividing the cost of goods sold by the average inventory.
Liquidity Ratio: Definition, Calculation & Analysis Demonstrate how to calculate the cash ratio, acid ratio, and current ratio, and then show how these ratio calculations are used to determine an organization's liquidity ratio.
Ratios of Interest to the Long-Term Creditor Decipher the formulas to determine the debt-to-equity ratio as well as the times interest earned ratio, then apply these formulas to calculate the ratios of interest over longer durations of time.
What Is a Value Chain? - Definition, Analysis & Example Evaluate the components of the value chain, express how businesses use value chains in their calculations, and analyze how to determine if the value chain actions are effective.

9 Lessons in Chapter 9: Basics of Financial Statement Analysis
Test your knowledge with a 30-question chapter practice test
Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
Not Taken
Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
Not Taken

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