Scarica international accounting summary e più Sbobinature in PDF di Cost Accounting solo su Docsity!
ACCOUNTING
accounting → activity of recording/classifying/summarizing/identifying/measuring/communicating/interpreting economic information in terms of money, transactions and events [through financial statements]
‣ service activity
‣ provides quantitative information
management accounting → [internal information] provision of information intended to be useful to management within the business
‣ decision making - outcome prediction - alternatives - adapting - improving - performance measurement
‣ managers
‣ space for subjectivity and^ flexibility^ →^ internal rules
financial accounting → [external information] provision of information intended for users outside the business
‣ ≠^ shareholders^ →^ ≠^ focuses
- investors [capital providers + main users of financial statements] → risks/returns/success assessment
- lenders [banks] → solvency [ability to pay interests/loan repayments]
- employees → solvency + long term viability [profitability of employer/continuity] job security
- suppliers → solvency + viability of long term relationship
- customers → long term viability/continuity + reliability
- government → regulation/taxation/statistics
- public → development/trends /environmental impacts
‣ fair - useful - comparable information^ →^ specific rules
external auditing → control mechanism designed to provide external/independent check on financial
statements/reports [published by entities + prepared by accountants under supervision of managers]
‣ statements validity assessed by auditors
‣ ≠^ country^ →^ ≠^ parameters
financial reporting → provision of useful financial information that faithfully represent economic
finance → raising/investing money in financial assets
financial management → using money inside company
financial accounting → reporting results from use of money through statements
bookkeeping → contains all types of accounting [recording data-keeping records]
international federation of accountant IFAC → coordinating organization for the accountancy profession international accounting standards board IASB [established in 2001, main international standard setter, 14 members, headed by IFRS with 22 trustees] [once named IASC + founded in 1973] → development of international financial reporting standards IFRS
‣ conceptual framework for^ financial reporting^ →^ presentation/preparation of^ financial statements
‣ development of globally accepted standards for^ financial reporting [comparable information]
‣ standard compliance encouragement + convergence of national standards
‣ transparency - efficiency - accountability
‣ international accounting standards [IASs] + IFRSs
- accounting is regulated by
‣ law [parliament] → codes, acts
‣ government/ministries
‣ stock exchange
‣ stock exchange regulators
‣ accountancy profession committees
‣ public interest independent bodies
purposes/users/definitions regulations
‣ commercial law: Codice Civile [Italian civil code] → financial reporting principles for domestic companies
‣ accounting regulation bodies: Organismo Italiano di Contabilità [OIC] [Italian standard setter] → accounting
standards [integrated with civil code’s principles]
‣ private limited companies [ s.r.l. , s.a.p.a.] → OIC + Italian civil code
‣ public limited companies [not listed] [ s.p.a.] → OIC + Italian civil code + IFRS
‣ public limited companies [listed] → international financial reporting standards [IAS-IFRSs] + additional rules from
stock exchange [borsa italiana s.p.a.] and its regulator [CONSOB- stock exchange regulator]
‣ small firms [ s.s. , s.n.c. , s.a.s. ] → simplified rules
‣ specific entities [banks, insurance companies] → national laws and national authorities regulations [ISVAP, banca
d’Italia] + IFRS-IAS harmonization → process of increasing the comparability of financial statements of companies of ≠ countries
‣ market globalization lead to the need for internationally comparable accounting information
‣ de facto harmonization^ →^ voluntary adoption of internationally recognized rules
‣ de jure harmonization^ →^ reduction of difference between national rules and international norms
- (^) EU → process of creating common standards across member states
‣ directives → legal acts that lay down results that must be achieved, but each member state is free to decide how
to transpose directives into national laws [1970s-1980s → accounting harmonization through directives incorporated in laws of member states]
‣ regulations [over rid national laws] → legal acts that have binding legal force throughout every member state and
enter into force on a set date in all the member states [from the 2000s → accounting harmonization through regulations]
- (^) 2002 regulation → compulsory use of IFRSs for listed companies [from 2005] and optional use for unlisted companies
‣ from 1990s → support of the IASC
ACCOUNTING DIFFERENCES UK - US - SWEDEN - AUSTRALIA - CANADA - THE NETHERLANDS FRANCE - ITALY - GERMANY - BELGIUM - SPAIN - PORTUGAL NATIONAL CONTEXTUAL FACTORS NATIONAL LEGAL SYSTEM common law system^ [originated in England] case law nonspecific company law and accounting rules commonwealth countries codified law system [originated from roman law] wide set of rules for all situations detailed company law and accounting rules continental europe FINANCE PROVIDERS providers of share capital external investors [investor oriented] active stock exchange accounting + auditing pressure [no access to private information] internal investors [creditor oriented] smaller pressure for auditing and accounting [there is access to private information] TAXATION doesn’t influence accounting separate account are filed for tax purposes influences accounting fiscal authorities use financial reports to determine taxable income ACCOUNTANCY PROFESSION higher need → higher power/ size/competence smaller need → smaller power/ size/competence ENVIRONMENTAL FACTORS strong equity market outsides shareholder weak equity market insider shareholder
BALANCE SHEET [BS] - INCOME STATEMENT [IS] - STATEMENT OF CASHFLOWS [SCF]
BALANCE SHEET [BS] [financial position] → state of affairs of an entity at a particular date [stocks indicator] = statement of financial position
‣ controlled resources/assets/applications list → how sources have been applied
- (^) fixed assets [non current/continuous] → property/plant/equipment/furniture/rights/vehicles
- (^) current assets [consumption/12month expiration/trading purposes] → cash/inventories/receivables/bank/ cash equivalents
‣ sources/claims list → where assets come from / repayments / recompense /amount due
- (^) equity capital [shareholders’ funds] → capital contributed by shareholders/profits/revaluations of assets
‣ affected by net income [profit/loss]
‣ affected by drawing [-] and additions capital from owner [+]
- (^) liabilities → payables/loans/obligations
‣ current [due within 12 months]
‣ non current [>12 months]
lists must balance = total resources = total sources
‣ periodic information [month/half year/year] about financial position of the business
INCOME STATEMENT [IS] [comprehensive income]→ flow of positive and negative elements of profit calculation
‣ income [+] [inflow] → revenues/rents received
‣ expenses [-] [outflow] → materials, goods, labor purchases/administration costs/advertisement costs/debts and
interests/taxation, electricity, audit, insurance profit/loss [net income] = total income - total expenses
‣ periodic information [month/half year/year] about the results of the operations
fundamental equations [A1 = assets at time 1 / OE1 = equity at time 1 / L1 = liabilities at time 1 / NA = equity = net assets = residual interest in asset after liabilities deduction/ NI = net income] transaction → event that affect the numbers in an entity’s accounting record
‣ dual impact on^ financial statements
financial statements ASSETS = LIABILITIES + EQUITY TRANSACTION EFFECT ON BS EXAMPLE assets [+/-] → equity [+/-] cash from owner’s equity assets [+/-] → liabilities [+/-] cash from loans / inventory from creditors assets [+] → assets [-] properties/inventory from cash / cash from receivables liabilities [+] → liabilities [-] short term debt converted into long term liabilities [-] → equity [+] debt converted into equity [creditor become shareholder] liabilities [+] → equity [-] dividend distributed to shareholder A 1 + E 1 = OE 0 + I 1 + L 1 A 1 = OE 1 + L 1 A 1 − L 1 = OE 1 A 1 − L 1 = OE 0 + N I N I = I 1 − E 1 A 1 − L 1 = OE 0 + I 1 − E 1 OE 1 = A 1 − L 1 = NA OE 1 − OE 0 = N I 1 OE 1 = N I 1 + OE 0 OE 2 = N I 2 + OE 1 = N I 2 + N I 1 + OE 0
STATEMENT OF CASHFLOWS [SCF] → how cash has come in and out in the period [cash accounting principle]
‣ inflows → capital/loans/receivables
‣ outflows → purchases/payments
‣ net cash flows from operating/investing/financing activities [≠ from earning]
double entry bookkeeping → technique used to record accounting information whenever a transaction takes place
‣ classification of effects of each transaction in 5 categories^ →^ separate accounts^ →^ chart of accounts [T accounts]
- A assets → cash/receivables/inventory/machines/property
- E expenses → purchases/wages/electricity/rent/taxes
- L liabilities → loans/payables
- I income → sales/interest received/rent received
- O owner’s capital → capital/retained profit/reserves
‣ information recorded is periodically summarized in the^ financial statement
‣ flexibility^ →^ each business decided which accounts to use
‣ transaction have 2 effects
- (^) debits = dare → incoming money [inflows]
- (^) credits = avere → outcoming money [outflows]
‣ end of recording period→^ balance [saldo] either credit/debit/null [difference between bigger and smaller
number]
‣ self balancing system^ →^ total debit balance = total credit balance
‣ trial balance → total debits = total credits → total assets = total liabilities + equity
- (^) income statement composition
‣ income/expenses accounts → once they’re closed down, balances transferred on IS account
- (^) income account’s balances [profit] → credit [income > expense]
- (^) expense account’s balances [loss] → debit [income < expense]
‣ IS account balance recorded in BS
- (^) balance sheet composition
‣ asset/liabilities/equity account’s balances
‣ IS balance
‣ → balances are carried forwards to the next period
‣ collection of balances, BS is not an account [as IS]
‣ all balances reported in BS will be found again in beginning of next period
double entry bookkeeping RESOURCES SOURCES assets [remainings] cash receivables inventory equity [contributed by owners] capital liabilities [due to others] expenses [used in the period] cost of goods sold wages income [arising from operations in the period] sales profit total asset total expenses total = total equity + liability total income total =
BS
IS
INFLOWS OUTFLOWS CASH DEBITS [INFLOW] CREDITS [OUTFLOW] ↑ asset ↓ asset ↓ liability ↑ liability ↓ equity ↑ equity ↓ revenue ↑ revenues ↑ expense ↓ expense
adjustment → transaction that has not yes been included in the accounting records
‣ periodic calculations require adjustments
‣ entities don’t complete/liquidate processes in 1^ financial year^ →^ continuous transactions
‣ ex:^ prepayments/inventory^ [expense^ recorded^ but^ carried^ forward^ to^ next^ period],^ accrued^ expenses/
depreciation [expenses recognized so they’re charged when consumed] INVENTORY ACCOUNT [asset]
- (^) updated at the end of the period → closing inventory [n]
‣ value carried forwards to next period → opening inventory [n+1] → n = n+
‣ during the n+1 period transactions will affect account value → closing inventory [n+1]
‣ n+1 = n+2 …
- (^) important asset → BS
- (^) application of matching principle → cost of goods sold:
‣ cost [purchasing price/manufacturing costs] of product that are sold to customers
‣ reported on IS when sales revenues are reported [matching principles]
‣ = opening inventory + purchases [new added inventory] - closing inventory
‣ gross profit = revenues - cost of goods sold
‣ BS → inventory account [credit] = asset
‣ IS → inventory account [debit] = expense
accrual [rateo passivo]→ revenues/expense incurred in the current accounting period but not yet recorded as expense [will be paid in the future period]
‣ revenues/expenses recorded when transaction occurs rather than when money is exchanged [paid in future n+1]
‣ record of revenues before receiving payment + record expense as incurred = next period
- (^) during accounting period accrued expenses are not recorded [not yet invoiced/paid], end of period:
‣ expense account [debit]^ →^ > expense [IS] [the part paid until new period]
‣ accruals account [credit]^ →^ > liability [BS] [the part paid until new period]
PREPAYMENT
prepayment [risconto attivo] → cost recorded during current period [es expense] but consumption in future accounting period [multi period services paid in advance]
‣ debt in advance of its official due date
- during period prepaid expense recorded as expense when paid, end of period:
‣ prepayment expenses account [debit]^ →^ > asset [BS] [the extra paid]
‣ expense account [credit]^ →^ < expense [IS] [the extra paid]
adjustments
depreciation → accounting method used to allocate the cost of a tangible/physical asset over its useful life
‣ useful life^ →^ period over which asset is expected to be available for use/number of production expected
‣ expected salvage value/residual value/scrap value^ →^ amount estimated to receive for asset at end of useful life
‣ fair value
‣ depreciable amount^ →^ cost of asset - residual value at end of useful life
- (^) fixed asset account not touched
- (^) decrease in value of fixed asset = book value [BV] = original value - accumulated depreciation - accumulated impairment losses + reversal of impairment losses + accumulated surplus from revaluation to fair value
‣ cost of carrying an asset on a company’s BS = net asset value [NAV]
- (^) depreciation expense → amount of depreciation reported on IS according to accrual basis + matching principle
‣ resources consumed in current period
- (^) accumulated depreciation → total amount of depreciation taken on company’s asset up to date of BS [summation of depreciations]
‣ negative value in BS [-] on fixed assets [decrease in value on fixed assets]
‣ = net book value [NBV] = historical cost - accumulate depreciation/impairment
‣ depreciation expense account [debit] → > expense [IS]
‣ accumulated depreciation [credit] → < asset [BS]
bad debt → account receivable that has been clearly identified as not being collectible
‣ loaned money that a creditor writes off as uncollectible
‣ result of a default on the part of the debtor
‣ recorded as a^ charge-off
- (^) direct write off method [debts related to particular debtor]
‣ bad debt account [debit]^ →^ > expense [IS]
‣ receivable account [credit] [BS]
doubtful debt → account receivable that might become a bad debt at some point in the future
‣ bad debt account [debit]^ →^ > expense [IS]
‣ allowance for doubtful debt amount [credit] [BS] [receivable] [negative sign]
‣ receivable account not touched
depreciation bad debts
inventory flow → how a business controls and manages the movement of products through its supply chain
‣ system/set of procedures that are followed to make sure that inventory is physically moved to the next supply
chain stage [interchangeable inventories]
- FIFO → first in, first out
‣ units moving out are the ones that came in first [have been in the longest]
‣ units remaining = last purchased
- LIFO → last in, last out
‣ units moving out are the ones that came in last [most recent ones]
‣ units remaining = earliest purchased
‣ risk of outdated/obsolete number [doesn’t represent fair value/inflation = reality check] → IAS-IFRS forbids it,
EU directives allow it
‣ used for tax purposes
- WA → weighted average cost
‣ = cost of goods purchased / units purchased = average cost per unit
‣ WAC of ending inventory = WA * units remaining [puchase - sales]
‣ CGS = WA * units sold
overhead → ongoing business expenses that cannot be directly attributed to a specific activity PROFIT ANALYSIS MEASURES gross profit → profit a company makes after deducting the costs associated with making and selling its products
‣ result of production activity
‣ = revenues - CGS
‣ resource needed to cover other expenses
net operating profit → profit after all expenses are taken out except for the cost of debt, taxes, and certain one-off items
‣ result obtained from normal operations [production/selling/administration]
‣ = earning before interest and taxes EBIT
‣ revenues - gross profit - distribution costs - administrative expenses
net profit before taxes → measure that looks at a company's profits before the company has to pay corporate income tax [EBT]
‣ = revenues - gross profit - net operating profit -^ finance costs
‣ all of a company’s profits without the consideration of any taxes
net profit → revenue that remains after expenses, and corporate accountants calculate profit at a number of levels
‣ IS bottom line
‣ after dividend payments^ →^ remaining = retained earning [equity]
‣ = revenues - gross profit - net operating profit - net profit before tax
goodwill → intangible asset that is associated with the purchase of one company/package of assets by another
‣ = purchase price - fair value of net asset = price - assets - liabilities
‣ represent the value of a company’s brand/loyalty/image^ →^ key factor for success
profit/income goodwill purchase cost rise purchase cost decline FIFO lowest highest LIFO highest lowest WA between between
- (^) additional documents [+ BS + IS + SCF]
‣ notes on accounts
‣ changes in equity statement
- (^) time period = IS + SCF time period
- (^) information indicated reason why equity >/< → accounting politics changes/errors/shareholders operations/ net income/gains and losses from evaluation of assets and liabilities
‣ CEO/board discussions
‣ auditor’s report
‣ graphs/photographs/stories/highlights
‣ corporate social reporting/ethics
‣ IAS 1 → presentation of financial statements / IAS 16[property, plant, equipment] / IAS 38 [intangible assets] / IAS
40 [investment properties]
- (^) objective → basis for presentation of general purpose financial statements to ensure comparability
- (^) purpose → financial information about financial position/performance/cashflow of an entity
‣ EU’s directives → for documents not prepared under IAS
‣ national laws → ex: civil code in Italy
other comprehensive income statement [OCI] → includes revenues, expenses, gains, and losses that have yet to be realized and are excluded from net income on an income statement
‣ creditor perspective → only realized profit should be included in IS
- (^) income realized when transaction is complete
‣ investor perspective → also other recognized changes in assets/liabilities carry information
- (^) ex: evaluation at fair value
‣ includes investor perspective
‣ gains/losses that have modified the value of assets and liabilities
‣ useful to understand ongoing changes in fair value of assets
‣ defined by IAS1-IFRSs
‣ items: revaluations of assets at fair value + actuarial gains/losses on defined benefit plans + gains/losses arising
from translating financial statement of foreign operations reporting documents/statements IAS1 EU DIRECTIVES BS no format/order prescribed current/non current distinction minimum content horizontal format [continental europe] + vertical format [UK] specific order and more details arabic numbers/capital letter… current assets/liabilities → expected to be realized/ held for sale in normal course of operating cycle [<12months], trading purposes, cash/cash equivalents non current assets → continuous use [>12 months], remain non current through useful life payables/receivables → due after > 12 months 4 - lecture 8 8 - lecture 8 IS profit, loss, other comprehensive income statements minimum content additional line items expense analysis - classification by nature → objective/ easier/compulsory [wages/material/depreciation…] expense analysis - classification by function → understandable/relevant [cost of sales/distribution expenses…] vertical by nature layout vertical by function layout ACCRUAL ACCOUNTING CASH ACCOUNTING IS SCF refer to a reporting period present same operations revenues/expense when was value generated/absorbed? receipts/payments when was liquidity generated/absorbed?
- (^) straight line depreciation → constant charge over useful life of asset + most used
‣ annual depreciation = (historical cost - scrap value ) / useful life
- (^) declining charge → decreasing charge over useful life of asset [more depreciation in early years]
‣ employed for assets expected to have many repair/maintenance costs
‣ tax purposes
- (^) usage → charge based on expected use/output
- (^) depreciation
‣ not applied to asset with indefinite useful life
- (^) goodwill
- (^) agriculture lands
‣ not for valuation → NBV don’t reflect market value
‣ not for replacement → accumulated depreciation is not fund used for replacement of assets depreciated
‣ not for tax purposes
impairment → permanent reduction in the value of a company asset [value decline, PESTEL changes, obsolesce..]
‣ impairment test for assets with indefinite useful life [intangible/fixed]
‣ impairment = difference: asset’s carrying value - recoverable amount
‣ carrying value > recoverable amount^ →^ durable loss, need for adjustment
‣ carrying value < recoverable amount^ →^ no adjustment needed
‣ impairment loss account [debit]^ →^ IS, expense
‣ accumulated impairment losses [credit]^ →^ BS, assets [-] [recoverable amount]
carrying value = NBV → amount at which an asset is recognized after deducting any accumulated depreciation and accumulated impairment losses recoverable amount → the greater of an asset's fair value less costs to sell, or its value in use
‣ greatest value that can be obtained from an asset, either by selling or using it = future benefit that can be
obtained from asset’s usage. its the higher between:
- (^) value in use → present value of future net cash flows generated by asset
- (^) net selling price → current selling price [fair value] - costs of disposal present value → current value of a future sum of money or stream of cash flows given a specified rate of return impaired asset → asset that has a market value less than the value listed on the company’s BS investment property → properties that company does’t use/occupy but keeps for rental/capital gain
‣ fair value as relevant value
‣ IAS 40
- (^) initially measured at cost
- (^) revaluation model at fair value
- (^) depreciation not required
- (^) gains/losses in IS
- (^) cost model applicable when fair value is not reasonable depreciation methods impairment investment properties
revaluation model [above cost] [IFRSs] → option of carrying a fixed asset at its revalued amount
‣ [subsequent to the revaluation] amount carried = revalued amount = asset's fair value - subsequent accumulated
depreciation - accumulated impairment losses
‣ re measurement must be at fair value + once a year
‣ PPE [fixed assets=property, plant, equipment] → only if fair value is reliable
‣ intangible asset → only if active market exists
‣ value to be depreciated higher
‣ carrying amount
- (^) < → impairment loss
- (^) > → impairment gain or reversal of impairment losses [if its equal to previous impairment losses]
‣ ≠ from income → OCI
‣ BS → revaluation reserve [OE] → can’t be distributed to shareholder as long as gains doesn’t accrue
[through depreciation/disposal]
‣ higher depreciation
surplus = fair value - NBV → non realized income arising from revaluation above cost
‣ > shareholder’s equity but not allowed for distribution
asset disposal → eliminating assets from accounting records
‣ sale of asset
- (^) carrying value = 0 [closing of accumulated depreciation/impairment/asset accounts]
- (^) cash/receivable > [debit]
‣ gain on disposal^ →^ sale price > net carrying value^ →^ income
‣ loss on disposal^ →^ sale price < net carrying value
revaluation disposal initial measurement → at cost [purchase/construction] subsequent measurement → cost model/revaluation model depreciation → definite life assets {-investment properties} net carrying value computation → revaluation model/fair value + cost model/NBV
liability → present obligation of the entity arising from past events, outflow of resource
‣ debts
- (^) clear creditor’s identity, amount, due date
- (^) ≠ creditors → financial [banks], trade [supplier, state…]
- (^) current/non-current based on wether they are repaid within operating cycle [operational liability - related to the production of goods and services] or one year [financial liability, related to cash related liabilities which result in an outflow of cash or other assets]
- (^) valued at face value {-long term → amortized cost}
- (^) debenture loan/bond → debt instrument issued by company, loan repayable on a fixed date [maturity] and pays a fixed interest rate
- (^) accrual → recognition that business has used up services in the period but has not paid from them yet
‣ provisions
- (^) liability of uncertain timing/amount
- (^) measured at the best estimate of the present value at the date of the balance sheet of the amount that should be paid at the foreseeable due date
- (^) ex: pensions/warranty products repairing equity → owner’s interest in the residual difference between asset and liabilities paid in capital → capital subscribed by shareholders when company is established
‣ capital of a share company is divided into shares of equal amount
‣ par value^ →^ capital divided by number of shares = share’s nominal value
‣ unpaid share capital^ →^ amount of subscribed capital not yet paid by shareholders [< equity]
‣ treasury stocks^ →^ share bought by company from shareholder [negative sign]
share premium → for shares issued after company establishing
‣ companies can issue additional shares to get more capital
‣ ordinary shoes^ →^ right to share profit + voting right + no guarantee of profit/capital repayment
‣ preference shares^ →^ right to receive^ fixed amount of dividend + paid before ordinary shareholder + no voting
rights
‣ = difference between issuance price and par value
legal reserve → portion of net profit that can’t be distributed to shareholder [used to reinforce equity]
‣ set up by law
‣ Italy^ →^ companies need to set aside 5% of profit each year until legal reserve is 20% of paid in capital
‣ used to protect creditors
revaluation reserve → result of revaluation of assets above cost [when revaluation is not taken in IS because its unrealized gains]
‣ amount stored is not available for distribution to shareholder until its realized
profit/loss reserve/retained earnings
‣ profits that have not beed distributed and losses that have not been covered yet
liabilities equity
- complementary aspects investigation profitability → situation in which an entity is generating a profit
‣ capability of business to create value for shareholders/creditor/growth
‣ investigation of main causes/activities that either support/reduce profitability
‣ efficiency measurement
liquidity and solvency → ability to meet with obligations/debts at the due date
‣ short term obligation^ →^ liquidity
‣ long term obligation^ →^ solvency
‣ investigation of consistency between investments and^ financings
- not only bottom line focus
- (^) subtotals è aggregations of items are useful
- (^) rearrangement of information to derive new information
‣ by function
‣ by current/non current
- comparative analysis comparative analysis → evaluation of consecutive financial statements
‣ ex: longitudinal analysis → comparison with previous year’s numbers
- (^) year to year change analysis
‣ relatively short time periods [2/3 years]
‣ individual accounts analysis
‣ presents changes in both absolute amounts and %
‣ cautions
- (^) % change can’t be computed in case of negative amount in one period and positive amount on the other
- (^) no amount for base period → no % change computable
- (^) small base period amount → % change must be interpreted
- (^) item has value in base period but none in the next → 100% decrease
- (^) index number trend analysis
‣ long term trend comparison [>2/3 years]
‣ chosen base period → all items set to 100
‣ better to choose normal year
‣ no all changes can be expressed by means of index numbers
- common size analysis common size analysis → shows what proportion of a group/subgroup is made up of a particular account
‣ evaluation of internal makeup of^ financial statement [impact of^ ≠^ expenses/distribution of^ financing/composition
of assets]
‣ evaluation of^ financial statement across companies^ →^ inter company comparisons
‣ ex: compare numbers with average for sector + compare with competitor’s numbers + compare^ ≠^ items
‣ limitation^ →^ failure to reflect relative sizes on companies^ →^ need for examination of both amounts under analysis
‣ BS^ →^ total A/L/E as 100%^ →^ accounts within these grouping are exposed as % of their total
‣ IS^ →^ sales as 100%, remaining account as % of sales
financial statements analysis
LECTURE 6-15 [finali]
