Financial Analysis Fundamentals – Course | Corporate Finance Institute

hi and welcome to financial analysis module one analyzing the income statement in this session we will walk through the key components of the income statement we perform a vertical analysis of the statement through ratios we perform a horizontal analysis using pastures history and finally we discuss how to benchmark against other companies within an industry when using ratio analysis there are two basic groups performance ratios and financial leverage ratios performance ratio speak to how a company is doing how profitable is it and how efficiently is it being run financial leverage ratios speak to the financial condition of the company how liquid and how solvent it is for this module we are only focusing on the performance ratios and when analyzing the income statement it is the profitability ratios that we pay attention to let's look at rims balance sheet and calculate some ratios starting with the total asset turnover ratio total asset turnover is calculated by taking sales and dividing them by total assets if you recall from the income statement of module 1 sales in 2010 were 14 9 53 to 24 we take this amount and divide it by rims total assets which if we look at the balance sheet we see are 10 204 409 the results is a total asset turnover of 1.4 7 this means that rim generated $1 and 47 cents worth of sales for every dollar of assets had had that concludes the session on the pyramid of ratios the pyramid takes all of the components from the other modules and puts it all together into one model for analyzing a company's financial performance we hope you enjoyed this module and we look forward to having you join us in your future learning endeavors

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