Return on Assets Return on Equity Comprehensive Income Total Shareholders Equity= Mixed Attribute Accounting Model Asset and Liability Valuation Income Tax Six Step in Financial Analysis Assets Liabilities

1. Return on Assets

Net Income/TA
Net profit margin*asset turnover

2. Return on Equity

Net income/TE

3. Comprehensive Income

- Marketable Equity Securities
- Derivatives held as cash flow hedges
- Minimum pension obligations
- Investments in certain foreign operations
• Unrealized changes in the market value of marketable
securities, hedged financial instruments and
derivatives.
• Foreign currency translation adjustments.
• Changes in pension and other post-employment
benefit assets and liabilities.

4. Total Shareholders Equity=

contributed capital+accumulated other comprehensive income+retained earnings

5. Mixed Attribute Accounting Model

used to provide an optimal mix of relevant and reliable
information in the financial statements

6. Asset and Liability Valuation

Historical value:acquisition cost, and initial present value
Current Value: fair value, current replacement cost, and net realizable value.

7. Income Tax

Accrual Accounting: Expense under accrual accounting does not necessarily
equal income taxes owed.
Income taxes on taxable income
+/- Increase (Decrease) in deferred tax liabilities
+/- Decrease (increase) in deferred tax assets

8. Six Step in Financial Analysis

1. Identify the Industry Economic
Characteristics (5 forces, value chain)
2.Identify The Company Strategies ( product differentiation and low cost leadership)
3. Assess quality of financial statements
4. Analyze profitability and risk
5. project future financial statements
6. value the firm

9. Assets

• A firm can recognize as assets only those resources:
1. for which it has the rights to future economic benefits as a result of a past
transaction or event.
2. for which the firm can predict and measure, the future benefits with a
reasonable degree of precision and reliability
Current Assets, PP&E, Investments, and intangibles

10. Liabilities

• Reflect managers' expectations of future sacrifices of resources to
satisfy existing obligations.