Running a Profitable Business: Understanding Financial Ratios
1h 49mBeginner2020-03-13
Authors
Jim Stice
Professor of Accounting at BYU
Kay Stice
Professor of Accounting at the BYU Marriott School of Management
Course details
Financial ratios—such as ROI (return on investment) or ROA (return on assets)— are a valuable tool for measuring a company's progress against a financial goal, a certain competitor, or the overall industry. In this course, professors Jim and Kay Stice explain the financial ratios found on balance sheets, income statements, and cash-flow statements and provide examples from real-world companies such as Walmart, Nordstrom, and McDonald's. They help you understand how to use financial ratios to analyze or benchmark your company against other companies.
Learning objectives
Identify the financial statement where you can find the source of financing for a company to buy assets.
Name the category that liabilities must be paid from.
Explain what you want to see when you look at a company’s operating income percentage.
List the steps to calculate accounts receivable turnover.
Identify the two components to use when calculating current ratio.
Recall the pitfall you need to avoid when performing financial ratio analysis.
Learning objectives
Identify the financial statement where you can find the source of financing for a company to buy assets.
Name the category that liabilities must be paid from.
Explain what you want to see when you look at a company’s operating income percentage.
List the steps to calculate accounts receivable turnover.
Identify the two components to use when calculating current ratio.
Recall the pitfall you need to avoid when performing financial ratio analysis.
Skills covered
Corporate FinanceFinance and AccountingLimited Series
Concepts
0. Introduction
- 01 - Gain financial insights
1. What Is Financial Ratio Analysis
- 02 - Introduction to financial ratio analysis
2. A Review of the Financial Statements
- 03 - What are the financial statements
- 04 - The balance sheet
- 05 - The income statement
- 06 - The statement of cash flows
3. The DuPont Framework
- 07 - The DuPont company - creating accounting history
- 08 - Return on equity
- 09 - DuPont framework
- 10 - DuPont framework - Target and Walmart
- 11 - Problem description to explanation
4. Common-Size Financial Statements
- 12 - Olympic medals and GDP per capita
- 13 - Common size overview
- 14 - Target's common-size income statement
- 15 - Target's common-size balance sheet
5. Profitability Ratios
- 16 - McDonald's most profitable items
- 17 - Comparing profitability with financial ratios
- 18 - Specific profitability ratios
- 19 - Price-earnings ratio
6. Efficiency Ratios
- 20 - Mark-up vs. profitability - Harry Winston vs. Walmart
- 21 - Number of days' sales in inventory
- 22 - Average collection period
- 23 - Length of the operating cycle
- 24 - Fixed asset turnover and other utilization ratios
7. Leverage Ratios
- 25 - Singapore Airlines' low leverage
- 26 - Current ratio
- 27 - Leverage ratios
8. Potential Pitfalls to Ratio Analysis
- 28 - Historical data pitfalls and baseball
- 29 - Excess data and comparability issues
- 30 - Smoking gun and historical data biases
Conclusion
- 31 - What financial ratio analysis can NOT do