The five step financial statement analysis plan – expanded.
Liquidity, activity, leverage, operating performance and cash flow – use these steps when analyzing financial statements. Determine working capital, your current ratio and quick test ratio to assist in determining liquidity. Learn formulas for turnover in accounts receivable, accounts payable and inventory to keep your activity current. Your company’s ability to service long-term debt will benefit your leverage. Operating performance takes the income statement and breaks it down into percentages instead of dollar amounts. The percentage will tell you the overall trend of performance. Traditional cash flow is broken down into business, personal and global figures.
David L. Osburn, MBA, CCRA is the founder and managing member of Osburn & Associates, LLC. His practice emphasizes business training and contract CFO work. Mr. Osburn conducts regular seminars, webinars, and keynote speeches covering banking, financing, credit, negotiation skills, marketing, management, and customized topics.
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