BYRON L.

DESEMBRANA
Instructor
+639194148501/byron.desembrana@gmail.com

LEARNING ACTIVITY #12

NAME:_________________________________________________ GRADE / SCORE:____________
COURSE AND YEAR:______BEED IV___________________________ DATE:__NOVEMBER 12,2021_____
SUBJECT: FINANCIAL LITERACY FOR EDUCATORS________________

PLEASE SHADE THE APPROPRIATE TYPE OF ACTIVITY:

 Concept Notes  Laboratory Report  Formal Theme  Practical Activity
 Exercise / Drill  Drawing / Art  Informal Theme  Others:
___________________

ACTIVITY TITLE: Financial Statement Analysis

LEARNING TARGETS: Identify the Importance of Financial Statement Analysis
REFERENCE(S) Basic Accounting by Ballada
(Title, Author, Pages)

CONCEPT NOTES AND EXAMPLES:

Financial statement (FS) analysis is the process of evaluating risks, performance, financial health, and future
prospects of a business by subjecting financial statement data to computational and analytical techniques with the
objective of making economic decisions.

There are three kinds of FS analysis techniques:

- Horizontal analysis
- Vertical analysis
- Ratio Analysis

Horizontal analysis, also called trend analysis, is a technique for evaluating a series of financial statement data
over a period of time with the purpose of determining the increase or decrease that has taken place. This will
reveal the behavior of the account over time. Is it increasing, decreasing or not moving? What is the magnitude of
the change? Also, what is the relative change in the balances of the account over time?

Vertical analysis, also called common-size analysis, is a technique that expresses each financial statement item as
a percentage of a base amount.

Ratio analysis expresses the relationship among selected items of financial statement data. The relationship is
expressed in terms of a percentage, a rate, or a simple proportion. A financial ratio is composed of a numerator
and a denominator. For example, a ratio that divides sales by assets will find the peso amount of sales generated
by every peso of asset invested. This is an important ratio because it tells us the efficiency of invested asset to
create revenue. This ratio is called asset turnover. There are many ratios used in business.

EXERCISE:

What are the importance of financial statement analysis as future educator, employee or entrepreneur?
 BYRON L. DESEMBRANA
Instructor
+639194148501/byron.desembrana@gmail.com