FIN 301 1st Edition Lecture 6 Notes are based off of power points Finance Statement Analysis I II III IV V VI Financial statements a Growth rate i Why do people want to see growth Because of higher prices or products or services ii Notice the impact of the recession was much greater on the bottom line than the top line iii Strategic Objective 1 Grow net income faster than sales bottom line faster than top line 2 Grow EPS faster than net income buy back shares b Common size financial statement i Purpose detect trends and make comparisons ii Simple to do by expressing their income statements and balance sheets c Activity ratios i A reason its going up is because they re done building stores their concern is online d Profitability ratio i Same as Common Size income statement Profit Margins are at all time high a Today its at 9 b A big factor Basic financial analysis a Use to detect trends over time and make comparisons Valuation ratios a Look at the company s market value and determine different majors b P E Ration is the best known valuation ratio c Multiple of earnings investors are willing to pay for stock companies want them high investors are looking for cheap stocks Measuring corporate performance the strategic profit model a Brings together different ratios so they can compare companies and look at performance over time b Why big difference in asset turnover i Big difference on what s on the balance sheet Economic and strategic forces in ROA a Exon Capital intensity creates a barrier to entry b Walmart Grocery stores are the lowest market because of all the commodities These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute c If you re selling a Lamborghini profit margin is high but if you re selling a Kia profit margin will be low and you ll sell more of