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Chapter 2: introduction to financial Statement Analysis
Reflection: Asset, current asset, marketable security, account receivable, inventories, long-term assets, depreciation, book value, goodwill, amortization, current liability, accounts payable, net working capital = current assets – current liability; capital lease, deferred taxes, DTA&DTL, equity, book value of equity, market capitalization, PPE, ( propriety, plant and equipment),market-to-book ratio( price-to-book (P/B) ratio equals to market value of equity divided by book value of equity. Analysts often classify firms with low market-to-book ratio as value stocks and these with high market-to-book ratios as growth stocks. A firm’s leverage or the extent to which it relies on debt as a source of financing. The debt ratio is a common ratio used to assess a firm’s leverage. Debt-equity ratio =total debt/total equity. Enterprise value = market value of equity+ debt-cash. Gross profit , operating expense, EBIT, pretax and net income, from EBIT, we deduct the interest expense related to outstanding debt to compute Global’s pretax income, and then we deduct corporate taxes to determine the firm’s net income. Earning per share = net income / shares outstanding. The convertible bonds. The number of shares may also grow if the firms issues convertible bonds, a form of debt that can be converted to shares. Retained earing = net profit – dividends. Gross margin= gross profit/sales; operating margin= operating income/sales, net profit margin= net income/sales; current ratio= current asses/current liability.