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Unit 4 · 9 lessons

Financial Analysis & Decision Making

Turning financial statements into decisions: cash flow, budgeting, ratio analysis, payroll, and the way corporations and manufacturers organize their books.

  • 59 practice questions
  • 60 flashcards
  • 1 interactive lesson
Start lesson 1 →Unit 4 test review →

Lessons

  1. 1The Cash Flow StatementProfit and cash are not the same thing — the cash flow statement explains exactly where a business's cash came from and where it went, sorted into three categories.6 questions
  2. 2BudgetsA budget is a financial plan for a future period, built from a sales forecast up through a full set of budgeted financial statements — comparing budget to actual reveals a variance worth investigating.6 questions
  3. 3Comparative & Common-Size StatementsComparing financial statements across years (horizontal analysis) or within one year against a base figure (vertical analysis) turns raw dollar amounts into trends and proportions a reader can actually judge.6 questions
  4. 4Liquidity RatiosLiquidity ratios ask a short-term question — can this business pay what it owes in the next year? — using working capital, the current ratio, and the tougher quick (acid-test) ratio.Interactive7 questions
  5. 5Solvency RatiosSolvency ratios ask a longer-term question than liquidity — how much of the business is financed by owners versus creditors, and how much risk (leverage) does that create?6 questions
  6. 6Activity RatiosActivity ratios measure how efficiently a business is actually using its assets — how fast inventory turns over into sales, and how fast credit customers pay what they owe.6 questions
  7. 7Profitability & Using Accounting for DecisionsProfitability ratios turn income statement figures into percentages that are easy to compare — but every ratio has limits, and good decisions combine several ratios, not just one.6 questions
  8. 8Payroll AccountingPaying employees involves gross earnings, several compulsory and voluntary deductions, and remittance to the CRA — with the employer paying its own matching share of CPP and EI on top.8 questions
  9. 9Corporations & Manufacturing CompaniesA corporation is a separate legal entity owned by shareholders through shares — very different from a sole proprietorship or partnership — and a manufacturer's costs split into direct materials, direct labour, and overhead.8 questions