Chapter 6

1
Chapter 6 Support

• Financial Statement Analysis

2
Remember?Common-size Analysis

• An analysis of percentage financial statements
  where all balance sheet items are divided by
  total assets and all income statement items are
  divided by net sales or revenues.

3
and Remember? Index Analyses

• An analysis of percentage financial statements
  where all balance sheet or income statement
  figures for a base year equal 100.0 (percent) and
  subsequent financial statement items are
  expressed as percentages of their values in the
  base year.

4
Use Excel to Conduct a Common-Size Analysis
First, go to http//finance.yahoo.com and type in
GOOG in the Get Quotes box to find a company
like Google.
Source Reproduced with permission of Yahoo! Inc.
2008 by Yahoo! Inc. YAHOO! and YAHOO! logo are
trademarks of Yahoo! Inc.
5
Use Excel to Conduct a Common-Size Analysis
Next, click the Get Quotes box to access the
Google data. Notice on the left side all of the
data that Yahoo! Provides for users.
Source Reproduced with permission of Yahoo! Inc.
2008 by Yahoo! Inc. YAHOO! and YAHOO! logo are
trademarks of Yahoo! Inc.
6
Use Excel to Conduct a Common-Size Analysis
Notice the important financial data? We will
click on the Income Statement and then the
Balance Sheet links to copy and paste the data
into Excel.
Source Reproduced with permission of Yahoo! Inc.
2008 by Yahoo! Inc. YAHOO! and YAHOO! logo are
trademarks of Yahoo! Inc.
7
Snapshot of Google Balance Sheet from Yahoo!
Finance
Here is the balance sheet data. Highlight and
copy into an open worksheet in Excel
Source Reproduced with permission of Yahoo! Inc.
2008 by Yahoo! Inc. YAHOO! and YAHOO! logo are
trademarks of Yahoo! Inc.
8
Snapshot of Google Income Statement from Yahoo!
Finance
Here is the income statement data. Highlight and
copy into an open worksheet in Excel
Source Reproduced with permission of Yahoo! Inc.
2008 by Yahoo! Inc. YAHOO! and YAHOO! logo are
trademarks of Yahoo! Inc.
9
Now create the Common-size analysis
We have tweaked some of the data cells pasted as
they are not copied as numbers, but text
formatting. The result is the ability to analyze
quickly and easily.
10
Now create the Common-size analysis
Notice we see RD and SGA increasing faster than
revenue, but it has been offset by lower cost of
revenue and taxes.
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Now create the Index analysis
Again, we can see that RD and SGA are rising
faster than revenue, but we also see that other
income is growing fast resulting in net income
available to common shareholders growing slightly
faster than revenue.
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We can do the same on the Balance Sheet!
Again, we analyze similarly and can see that some
longer-lived assets are seeing huge increases
(goodwill and PPE) which is being financed by
internally generated funds shown via RE.
13
Ratio Analysis

• We can, of course, now utilize the data you have
  in Excel to conduct ratio analysis.
• You would likely want to also collect industry
  relevant data.
• The result would allow you to do the type of
  analysis discussed in the text.