Term
| 1. purpose 2. corporate overview 3. quantitative financial analysis techniques 4. detailed accounting analysis 5. comprehensive analysis 6. financial analysis decision |
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Definition
| 6 step approach for a systematic financial analysis process |
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Term
| corporate overview (and 2 facets of) |
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Definition
| 1. industry analysis 2. business strategy. the __ identifies the competing industry and its primary characteristics and to analyze how the company attempts to compete. |
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Term
| 1. what is the industry? 2. what is the size of the industry? 3. what are the largest companies? 4. how does the business cycle affect the firms? 5. what is the competition (growth rates, concentration, degree of product differentiation, substitutes, economies of scale, threat of new entrants, legal barriers, regulations)? |
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Definition
| 6 questions of industry analysis |
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Term
| 1. cost leadership 2. product differentiation 3. core competencies |
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Definition
| 3 types of business strategy |
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Term
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Definition
| the __ business strategy utilizes low cost producers, economies of scale, low input prices, thin margins, and high volume |
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Term
| product differentiation strategy |
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Definition
| the __ strategy utilizes specific attributes that customers value (quality, variety, service, delivery time) |
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Term
| core competencies strategy |
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Definition
| the __ strategy utilizes what the company does well, develops a niche strategy that supplies one segment of the market with exactly what it wants |
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Term
| 1. financial statements 2. common-size analysis (converts raw numbers into percentages) 3. financial ratios 4. time series analysis 5. comparative analysis 6. quarterly analysis (10q) 7. models |
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Definition
| 7 tools for qualitative financial analysis |
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Term
| 1. does the accounting info capture the underlying business reality? 2. evaluate accounting events and disclosures, examining notes and MD&A 3. evaluate earnings management potential 4. recast accounting numbers and ratios when necessary |
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Definition
| 4 facets of detailed accounting analysis |
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Term
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Definition
| improving earnings numbers reported by manipulating the accounting numbers |
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Term
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Definition
| summarization of the findings from the first steps, stressing the most relevant information for determining whether or not to invest in a company. discuss any red flags that were recognized. these are areas of particular concern, where the company underperforms based on trend or industry comparisons or other factors that suggest increased financial risk |
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Term
| financial analysis decision |
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Definition
| decision made based on the initial purpose of the analysis. all decisions are based on a thorough financial analysis. the company's future is predicted largely on what has happened in the past and how the company has positioned itself for future competition and business opportunities |
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