Analysis of Financial Statements

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Analysis of Financial Statements: Liquidity

Company’s ability to pay short-term debts.

The most liquid current assets available to pay current liabilities.

Ability of the company to collect its credit sales.

AND=Average Number of Days Receivables Outstanding

Useful for comparing the results to the credit terms.

MIT=Merchandising Inventory Turnover

Measures the relative size of the merchandise inventory to the net sales.

Analysis of Financial Statements: Profitability

Help investors evaluate the past earning power.

How many dollars in sales are produced by each dollar invested in assets.

The earning power of the assets.

How much was earned for each dollar invested.

The market price of the shares.


New Corporation

Balance sheet

December 31, 000 dollars

Assets

1994

1993

Cash

38

24

Marketable Securities (at cost)

75

60

Accounts Receivable

125

116

Inventories

172

154

Total Current Assets

410

354

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