Common Size Statements

Financial analysts have a variety of ways of sizing up a company’s worth. Ratio analysis is commonly employed. However, sometimes, analysts will use a variation of ratio analysis known as common size statements. This form of analysis is unique because …

Financial Leverage

Levers are necessary in physics to enable the lifting of a nearly impossible weight. With their application, they permit the use of less force than would normally be required without them. There are two forms of leverage applied to companies …

Operating Leverage

A lever is defined as a rigid bar that pivots about at one point and that is used to move an object at a second point with a force applied to a third point. Operating leverage is a force used …

Earnings Per Share

This is the single most used financial ratio and is an invaluable method for evaluating a company’s success. It is a concise way of presenting the company’s profitability. Earnings per share is the earnings of a company divided by the …

The Basics of Quarterly Statements

Publicly -traded companies are required by the New York Stock Exchange (NYSE) and the Securities and Exchange Commission (SEC) to produce quarterly financial statements for their shareholders. In reality, quarterly reports are published only three times a year. There is …

Consolidated Financial Statements

Consolidated financial statements are the combined financial statements of the parent company and its subsidiaries.  The accounting principles necessitate assets, liabilities, revenues, and expenses of majority-owned subsidiaries be incorporated with their parents. To do so, accountants must eliminate any transactions …

Statement of Comprehensive Income

The Statement of Comprehensive Income first made its appearance on the accounting scene in 1998. It can be presented as a independent statement of its own, as part of the statement of stockholders’ equity, or as an addendum to the …

Accounting for Extraordinary Items

In order for an item to be considered extraordinary, it must meet the following criteria. The gain or loss experienced by the company from the transaction or event must be- Unusual. This means it is unrelated to the business’ normal …

Accounting for Discontinued Operations

In financial statements, discontinued operations must be disclosed on the income statement in the period in which it occurs. Although a discontinued operation is considered a contingency, the guidelines for revealing this information is not the same as for other …

Handling Manufacturing Costs

Manufacturing costs are considered assets and are calculated as part of the cost of manufactured units in inventory until the units are sold. There are three main types of manufacturing costs: Labor Materials Overhead All three types of manufacturing costs …