Analyzing Accounting Information PDF

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Analyzing Accounting Information...

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Analyzing Accounting Information Corporation Terminology  

SHARE CAPITAL - Amount shareholders invested in the corporation RETAINED EARNINGS - Earnings (profit) that have not been distributed to shareholders in the form of dividends.

How to calculate cash provided from the sale of an asset (Equipment, Furniture etc.) 1. We need to calculate the book value of the asset sold. Book value = Cost – Accumulated depreciation. Cost = the change in the value listed in balance sheet = $30,000 Accumulated depreciation = $30,000 + $4500 - $26,500 = $8000 Book value is $30,000 - $8000 = $22,000 Cash proceeds from sale = Book value – loss on sale $22,000 - $3200 = $18,800

How to calculate cash dividends paid Beginning Retained Earnings + Net Income – Dividends = Ending Retained Earnings $80,000

+ $17,080

- Dividends = $87,080

Dividends = 80,000 + 17,080 – 87,080 = $10,000

Horizontal Analysis - Compare accounts across one or more periods.

Vertical Analysis - Compare accounts to a benchmark within the same period.

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Financial Ratios

Profitability Ratios - Are used to measure how well a business is performing in relation to profits Compare periods Help compare different periods within the same company

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Industry Analysis Help compare different companies within the same industry

Ratios (metrics) can be used to assess the performance of a hospitality business. Ratios help assess each business performance in comparison to:  other businesses, or  the industry's average Higher gross profit margin means more profitability.

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