Limitations of Financial 
    Statements
      Limitations of Financial Statements for Financial 
      Analysis:
        1)Historical
        2)Accounting policy GAAP:
         
          Inputs comparability
         
          Constrains financial measurement
      3) Theory of business is not sufficiently strong to give 
        us absolute standard
        4)Most ratios we benchmark with relative 
      comparisons:
         
          Industry average comparison
         
          Trend analysis 
   Limitations of Financial 
   Statements
     The exception is finance and returns .
     We  always benchmark returns with a financial 
     market opportunity cost (an absolute standard)
     5) Ratios can be calculated in different ways by 
      different financial analysts.
     6) Financial statements and financial ratios are 
      at best  ½ of a complete analysis
   Ratios:
     EBITDA margin
     (Net operating margin)
            EBITDA Margin EBITDA
               
                            Sales
     Measure of operating profitability per $1 of 
      Sales.
     Benchmark ≈ 12.5%
   Invested Capital
   Investment Expenditure for an entire business:
   Invested Capital (IC) 
   Definitions of Invested Capital:
   A. The financial definition of IC:
    IC is the total amount invested (expended)by  
     financial asset holders of a firm into the 
     financial assets of a firm 
   Invested Capital
   The financial definition
      Bank Indebtedness
      + other S.T. Debt
      + Dividends Payable
      + Current Portion of  L.T. Debt
      + L.T. Debt
      + Deferred Tax
      + Preferred Shares
      + Shared Capital
      + Retained Earnings 
      + Other
      = Invested Capital