Financial Statement Analysis: Ratios, Horizontal & Vertical Analysis

For more resources, visit https://FarhatLectures.com Learn financial statement analysis and financial ratios with Farhat Lectures. This 15-lesson course covers horizontal analysis, vertical analysis, common-size statements, liquidity, activity, solvency, profitability, investor ratios, and cash-flow measures. Worked questions and CPA-style simulations help you connect calculations with the balance sheet and business performance. Designed for accounting and finance students, including Intermediate Accounting and financial statement analysis courses, with supplemental practice for CPA and CMA candidates. Business owners, managers, analysts, and professionals can also use the lectures as a refresher. WHAT IS FINANCIAL STATEMENT ANALYSIS? It uses financial reports, comparisons, percentages, trends, and ratios to assess financial position and performance. A useful analysis connects the calculation to the company's circumstances, prior periods, peers, and accounting policies. LESSONS — CURRENT PLAYLIST ORDER 1. Financial Statement Analysis: Introduction 2. Horizontal and Vertical Analysis 3. Common-Size Financial Statements 4. Liquidity Ratios: Current and Acid-Test Ratios 5. Activity Ratios and the Cash Conversion Cycle 6. Solvency Ratios 7. Profitability Ratios 8. P/E Ratio and Investor Ratios 9. Liquidity Ratios: Current, Quick, and Cash Ratios 10. Financial Ratios: CPA Exam Simulation 11. CPA Exam Simulation: Financial Ratios — Intermediate Accounting 12. Activity Ratios Explained 13. Cash Coverage and Free Cash Flow 14. Liquidity Ratios: Financial Statement Analysis 15. CPA Exam Question: Current Ratio vs. Quick Ratio WHAT YOU WILL PRACTICE • Compare financial-statement amounts across periods and express items as percentages of a base. • Calculate and interpret current, quick, and cash ratios. • Analyze turnover measures and the operating and cash conversion cycles. • Evaluate solvency, leverage, profitability, and investor-related measures. • Connect cash coverage and free cash flow with financial analysis. • Work backward from given ratios to solve for missing balance-sheet amounts. • Explain why industry, seasonality, accounting choices, and unusual events affect comparisons. COMMON FINANCIAL-ANALYSIS QUESTIONS What is horizontal analysis? Horizontal analysis compares the same financial-statement items across periods, including dollar changes and percentage changes. What is vertical analysis? Vertical analysis expresses statement items as percentages of a common base, such as net sales on an income statement or total assets on a balance sheet. Common-size statements help compare businesses of different sizes. How do the current ratio and quick ratio differ? Current ratio = current assets ÷ current liabilities. The quick ratio uses quick assets, commonly cash, short-term marketable investments, and net receivables, divided by current liabilities. Inventory and prepaid expenses are excluded from quick assets. What is the difference between liquidity and solvency? Liquidity concerns the ability to meet short-term obligations. Solvency concerns longer-term debt-paying capacity and financial risk. What do activity ratios measure? They assess how efficiently a company uses resources such as receivables, inventory, and total assets. Use the turnover and cash conversion cycle lessons to connect these measures with operations. What is free cash flow? A common calculation is operating cash flow minus capital expenditures. Some courses and questions use a dividend-adjusted convention, so identify the stated definition before comparing results. Is a higher financial ratio always better? No. Interpretation depends on the ratio, industry, business model, period, and comparison benchmark. Explain what changed and why instead of relying only on a memorized target. STUDY GUIDANCE Start with the introductory and comparison-method lessons, then work through the ratio categories. Use the final six lessons for additional explanations, cash-flow analysis, and practice. Pause before each simulation solution and solve for the missing amounts yourself. RELATED STUDY PATHS Balance Sheet Explained — six focused lessons: https://www.youtube.com/playlist?list=PLOWCJCPA0Q7A Broader Intermediate Accounting course — balance sheet, cash flows and financial ratios: https://www.youtube.com/playlist?list=PLxP0KZzCGFYMrKbiRXLQDCD8tAep4pZNN Statement of Cash Flows — direct and indirect methods: https://www.youtube.com/playlist?list=PLxP0KZzCGFYNgVTIBLQUwVkFA3qt-UT9H Farhat Lectures provides accounting and finance instruction for students and professional exam candidates. #FinancialStatementAnalysis #FinancialRatios #IntermediateAccounting