📊 Ratio Analysis
Purpose: To evaluate the financial health and performance of a company by comparing various financial metrics.
Examples: Liquidity ratios (e.g., current ratio, quick ratio), profitability ratios (e.g., net profit margin, return on equity), and solvency ratios (e.g., debt to equity ratio).
📈 Trend Analysis:
Purpose: To assess the financial performance of a company over a period of time.
Examples: Analyzing revenue growth, expense trends, and changes in net income over multiple periods.
🔍 Vertical and Horizontal Analysis
Purpose: To analyze financial statements by looking at each line item as a percentage of a base figure (vertical) and comparing line items over different periods (horizontal).
Examples: Vertical analysis of income statement (e.g., cost of goods sold as a percentage of sales) and horizontal analysis of balance sheets (e.g., year-over-year changes in assets and liabilities).
💵 Cash Flow Analysis
Purpose: To assess the cash inflows and outflows of a company to determine its liquidity and solvency.
Examples: Operating cash flow analysis, free cash flow analysis, and net cash flow from financing activities.
💰 Valuation Analysis
Purpose: To determine the intrinsic value of a company or its assets for investment purposes.
Examples: Discounted cash flow (DCF) analysis, comparable company analysis, and precedent transactions analysis.
📜 Common-Size Analysis
Purpose: To compare financial statements by expressing each line item as a percentage of a significant total.
Examples: Common-size income statements (e.g., each expense item as a percentage of sales) and common-size balance sheets (e.g., each asset as a percentage of total assets).
🧮 DuPont Analysis
Purpose: To break down the components of return on equity (ROE) and understand the drivers of financial performance.
Examples: Decomposing ROE into profit margin, asset turnover, and financial leverage.
📑 Financial Modeling
Purpose: To create a mathematical model to represent the financial performance of a business, project, or investment.
Examples: Building pro forma financial statements, sensitivity analysis, and scenario analysis.
📚 Scenario and Sensitivity Analysis
Purpose: To assess the impact of different variables on financial outcomes under various scenarios.
Examples: Changing assumptions for sales growth rates, interest rates, and examining the effects on net income and cash flows.
🎯 Benchmarking
Purpose: To compare a company's performance metrics to industry standards or competitors.
Examples: Comparing profitability ratios, efficiency ratios, and other financial metrics against industry peers.
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