Financial statement analysis — ratios, vertical and horizontal

What this note covers

1. Purpose and framework of financial statement analysis
2. Profitability ratios — gross profit margin and net profit margin
3. Return on assets and the efficiency of asset use
4. Liquidity ratios — current ratio and acid-test ratio
5. Financial structure — debt-to-equity ratio
6. Vertical analysis — common-size financial statements
7. Horizontal analysis — trend analysis over time

7 sections · 12 key terms & formulas · 6 common mistakes