This chapter focuses on working with information contained in financial statements. Specifically, we studied standardized financial statements, ratio analysis, and long-term financial planning.
We explained that differences in firm size make it difficult to compare financial statements, and we discussed how to form common-size statements to make comparisons easier and more meaningful.
Evaluating ratios of accounting numbers is another way of comparing financial statement information. We defined a number of the most commonly used ratios, and we discussed the famous Du Pont identity.
We showed how pro forma financial statements can be generated and used to plan for future financing needs.
After you have studied this chapter, we hope that you have some perspective on the uses and abuses of financial statement information. You should also find that your vocabulary of business and financial terms has grown substantially.
