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Chapter 2Introduction to Financial Statement Analysis – Study Notes

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The Financial Statements

Fundamental Accounting Equation

Financial Statement Effects of Inventory Costing Methods

Ratios: Earnings Per Share (EPS)

Ratios: Working Capital and the Current Ratio

Ratios: Quick (Acid Test) Ratio

Ratios: Gross Profit Rate

Ratios: Profit Margin

Ratios: Return on Assets (ROA)

Ratios: Total Asset Turnover

Ratios: Return on Equity (ROE)

Ratios: Price-Earnings Ratio (PE Ratio)

Introduction to the Statement of Cash Flows

Operating Activities: Indirect Method

Investing Activities

Financing Activities

Sarbanes-Oxley Act

Useful Information