...9-193-029 REV: SEPTEMBER 13, 2004 WILLIAM BRUNS Introduction to Financial Ratios and Financial Statement Analysis There is almost always a reason why someone picks up an organization’s financial statements and begins to analyze them. Lenders or creditors may be interested in determining whether they will be repaid money they have lent or may lend to the organization. Investors may be interested in comparing a potential investment in one organization with that of another. Employees may want to compare the current performance or financial status of their employer with earlier periods. Regulatory agencies often need to assess organizational or industry financial health and performance. Financial analysis is always based on a set of questions, and the specific questions requiring answers depend on who the financial statement user is and the reasons for his or her analysis. Financial analyses based on accounting information consistently involve comparisons. Amounts or ratios may be compared with industry norms, the same measurement in a prior period, the same measurement in a competitor’s organization, or with planned and budgeted amounts previously established. Figuring out which comparisons will best answer the questions motivating the analysis is one of the necessary steps in making the best use of accounting information. Financial ratios can help describe the financial condition of an organization, the efficiency of its activities, its comparable profitability...
Words: 951 - Pages: 4
...Journal of Accounting and Economics 11 (1989) 295-329. North-Holland FINANCIAL STATEMENT ANALYSIS AND THE PREDICTION OF STOCK RETURNS* Jane A. O U Santa Clara university, Santa Clara, CA 95053, USA Stephen H. P E N M A N Universi(v of California, Berkeley, CA 94720, USA Received January 1988, final version received April 1989 This paper performs a financial statement analysis that combines a large set of financial statement items into one summary measure which indicates the direction of one-year-ahead earnings changes. Positions are taken in stocks on the basis of this measure during the period 1973-1983, which involve cancelling long and short positions with zero net investment. The two-year holding-period return to the long and short positions is in the order of 12.5%. After adjustment for 'size effects' the return is about 7.0%. These returns cannot be explained by nominated firm risk characteristics. 1. Introduction F i n a n c i a l s t a t e m e n t analysis identifies aspects of financial statements that a r e r e l e v a n t to investment decisions. O n e goal of the analysis is to assess firm value from financial statements. M u c h empirical a c c o u n t i n g research has a t t e m p t e d to discover value-relevant accounting attributes in o r d e r to enhance financial s t a t e m e n t analysis. T h e a p p r o a c h taken in this work assumes that m a r k e t price is sufficient for d e t e r m i n i n g firms' values a n d thus serves as a b e n...
Words: 13257 - Pages: 54
...SEC 10-K FINANCIAL STATEMENT ANALYSIS PROJECT Click Link Below To Buy: http://hwcampus.com/shop/sec-10-k-financial-statement-analysis-project/ SEC 10-K FINANCIAL STATEMENT ANALYSIS PROJECT (Wallmart and CA, Inc,) 10 K – SEC Analysis Project A written Case Analysis is required for this course. The project is expected to consist of comprehensive and relevant responses to all the requirements of the Case Analysis. Requirements of the Case Analysis, which require computation, must be prepared using Microsoft Excel or Word or both and all the work must be presented in a detailed manner. Requirements of the Case Analysis which require a written response are expected to consist of an introduction, well-referenced body with appropriate headings and sub-headings, conclusion and reference list. APA style is required. Completed papers will typically be 4-5 pages in length and must read as a well-edited, professional paper. All papers will be typed, double-spaced, spell-checked, grammar-checked, and prepared in APA format. Go the SEC website http://www.sec.gov/edgar/searchedgar/companysearch.html 1. Click on “Company Filings” , then click on “Company or fund name, ticker symbol, CIK ….” 2. Type in the CIK (or company name). (Sometimes there may be multiple options available; use your judgment, and click on the right link). 3. Once you get the list of forms filed for the company, type “10-K” in the Form Type box. Now, only Form 10-Ks filed will appear...
Words: 566 - Pages: 3
...Group Work: Financial Statement Analysis of your selected listed Bangladeshi company Guideline for Term Paper Dear All, Please complete the strategy analysis and accounting analysis based on the following guideline by next 2 weeks for the company allocated to your group for term paper, and give me the update. Topic Specific Topics Key Questions Strategy Analysis Industry Analysis (Five forces Model) Rivalry -How do firms in an industry rivalry compete among themselves? -What are the dimensions of the competition? Threat of new entrants -What are the legal entry barriers for a new firm? -What are the economic entry barriers for a new firm? Threat of substitute products -Is there any substitute products of the industry? -If so, What is the level of price difference with substitute product? Bargaining power of buyers -What is level of buyers’ price sensitivity? -What is the buyers’ relative bargaining power? Bargaining power of suppliers -How many numbers of suppliers? -How much critical the product is to buyers? Competitive Strategy Analysis Which competitive strategy the company has taken? Cost leadership or Differentiation Corporate Strategy Analysis -Are there significant imperfections in the product, labor or financial markets in the industry in which the company is operating? - Does the company have special resources such as brand names, proprietary know how, access to scarce distribution channels, and special organization...
Words: 317 - Pages: 2
...CHAPTER 5—BASICS OF ANALYSIS MULTIPLE CHOICE 1. Statements in which all items are expressed only in relative terms (percentages of a base) are termed: a. vertical Statements. b. horizontal Statements. c. funds Statements. d. common-Size Statements. e. None of the answers are correct. \. 2. In financial statement analysis, ratios are: a. the only type of analysis where industry data are available. b. absolute numbers converted to a common base. c. fractions usually expressed in percent or times. d. the only indication of the financial position of the firm. e. None of the answers are correct. 3. Denver Dynamics has net income of $2,000,000. Oakland Enterprises has net income of $2,500,000. Which of the following best compares the profitability of Denver and Oakland? a. Oakland Enterprises is 25% more profitable than Denver Dynamics. b. Oakland Enterprises is more profitable than Denver Dynamics, but the comparison can't be quantified. c. Oakland Enterprises is only more profitable if it is smaller than Denver Dynamics. d. Further information is needed for a reasonable comparison. e. Oakland Enterprises is more profitable if it is a larger firm than Denver Dynamics. 4. Which of the following can offer a type of comparison in financial statement analysis? a. Past ratios and figures b. Industry averages c. Statistics of competitors d. All of the answers are correct. e. None of the answers are correct. 5. Which of the following...
Words: 2598 - Pages: 11
...Report on | Financial Statement Analysis & Valuation of Monno Jute Stafllers | A report on “Financial Statement Analysis & Valuation of Monno Jute Stafllers ” Course Title: FINANCIAL STATEMENT ANALYSIS & VALUATION Course Code: F-401 Submitted To: Dr. Mahmood Osman Imam Professor Department of Finance, University of Dhaka Hussain Ahmed Enamul Huda Lecturer Department of Finance, University of Dhaka Submitted By: Sayma Khair 17-115 BBA 17th batch 4th year 1st semester Department of Finance, University of Dhaka Date of Submission: July22, 2014. Letter of Transmittal July 22, 2014 Mahmood Osman Imam Professor Department of Finance University of Dhaka Subject: Submission of term paper on Financial Statement Analysis & Valuation of Monno Jute Stafllers Dear sir, I am extremely gratified & enthusiastic to present a report on Financial Statement Analysis & Valuation Of Monno Jute Stafllers as per as a part of requirement of our BBA Program of Course “FINANCIAL STATEMENT ANALYSIS & VALUATION”, Course no: F-401 . This report was assigned to us with a view to scrutinizing our skill and flamboyance when it comes to financial statement analysis know-how. Moreover, the purpose of this term paper was to extract our inner ability & enhance our financial statement analysis & valuation related potentials. We acknowledge the...
Words: 8567 - Pages: 35
...Course Goals and Learning Objectives: The goal of this course is to provide students a practitioner’s perspective on financial statement analysis. The course will emphasize thinking beyond the text and will focus to how to critically examine financial statement information and management representations. The course will primarily focus on financial statements prepared in accordance with US GAAP, however differences between US GAAP and IFRS will be outlined and examined. The class will be taught using a combination of lectures, class discussions and real-world case studies. In order to maximize our time together, students are expected to read the assigned chapters and complete the case studies on time. Given the brevity of the course and lecture time, students are encouraged to email me directly with questions at any time. Required Materials Textbook: Financial Statement Analysis & Valuation, (3rd Edition), By Easton, McAnally, Sommers & Zhang, Cambridge Business Publishers, 2013. ISBN: 978-1-61853-009-7 Case studies will be provided on TLE. Grading Schedule Class Participation/Case Work: Individual Project: Mid-Term/Exam 1: Final Exam: 20% 30% 20% 30% Grading Expectations Class Participation/Case Work: Each student should be prepared to discuss the required readings. To satisfy the requirements of class participation, students will be required to answer direct questions from the instructor and must actively participate in group discussions. 1|Page Case Work...
Words: 854 - Pages: 4
...solution SOLUTIONS TO EXERCISES AND CASES For FINANCIAL STATEMENT ANALYSIS AND SECURITY VALUATION Stephen H. Penman Fifth Edition CHAPTER ONE Introduction to Investing and Valuation Concept Questions C1.1. Fundamental risk arises from the inherent risk in the business – from sales revenue falling or expenses rising unexpectedly, for example. Price risk is the risk of prices deviating from fundamental value. Prices are subject to fundamental risk, but can move away from fundamental value, irrespective of outcomes in the fundamentals. When an investor buys a stock, she takes on fundamental risk – the stock price could drop because the firm’s operations don’t meet expectations – but she also runs the (price) risk of buying a stock that is overpriced or selling a stock that is underpriced. Chapter 19 elaborates and Figure 19.5 (in Chapter 19) gives a display. C1.2. A beta technology measures the risk of an investment and the required return that the risk requires. The capital asset pricing model (CAPM) is a beta technology; is measures risk (beta) and the required return for the beta. An alpha technology involves techniques that identify mispriced stocks than can earn a return in excess of the required return (an alpha return). See Box 1.1. The appendix to Chapter 3 elaborates on beta technologies. C1.3. This statement is based on a statistical average from the historical data: The return on stocks...
Words: 103287 - Pages: 414
... Orrstown Financial Services 2 In this assignment, we focus on Orrstown Financial Services vs. DNB Financial Corporations. Both institutions have similar financials and sizes of entities. The first part of the assignment is about, studying both institutions and compare them to each other. After that there will be an analysis and general study about the health of ORRF as an overall entity. All data are taken from UBPR reports, 10 k reports, Bloomberg, Yahoo, and Banks main website. Common Size Net Income Statement This section of the analysis is about computing common size income statement for both ORRF and DNBFC. It seems that ORRF net income have decreased in value and resulted in huge loss in 2012 as (63%) of net revenue. This dramatic change of the net income value started in 2011 due to the real estate low prices that have been an issue since the financial crisis started. This conclusion is supported by looking at the provision of loan losses that increased in 2011, showing the cause of the huge net loss. On the other side, DNBFC provision for loan losses have increased reasonably in 2008 to become (10%). In addition, the net income increased steadily after 2008 too. It appears, so far, from the Net Income Statement that DNBFC is doing much better than ORRF. Common Size Balance Sheet Statement Based on the common size balance sheet statement of ORRF, we can see that the total loans used to be very high before the financial crisis. After 2009...
Words: 3124 - Pages: 13
...Financial Statement Analysis and Interpretation FIN/571 Corporate Finance November 23, 2015 Financial Statement Analysis The goal of any business regardless of its size should be to obtain and maintain financial profitability and maximize its shareholder’s wealth. The goal of a good manager is to have a solid understanding of his organization’s financial functionality in order to achieve the aforementioned by others. With a thorough understanding of a company’s financial statement managers can monitor cash flows, identify upcoming and changing trends as well as monitor a company’s financial performance in order to anticipate any changes that will affect a company’s profitability and the shareholder’s equity. Within the confines of this paper Team A will compare, contrast, and compute the financial statement analysis of three companies, which are Toyota, Southwest Airlines, and J C Penney. Team A will analyze each company’s financial statement by utilizing liquidity ratios, efficiency ratios, leverage ratios, and profitability ratios. We will also discuss the differences of the income statement in regards to the specific industries of the companies that we have chosen as well as the differences in accounting practices of the International Financial Reporting Standards (IFRS), the Financial Accounting Standard Board (FASB) and the Generally Accepted Accounting Principles (GAAP). Industry Differences Although most income statements are essentially...
Words: 1957 - Pages: 8
...[pic] [pic] Assignment On “A Business Analysis of Square Pharmaceutical Ltd.” Course Title: Financial Statement Analysis Course code: ACT-513 Assignment on “Business Analysis of” (Square Pharmaceutical Ltd) Submitted to: Mr. Mohammed Sakhawat Hossain Assistant Professor Faculty of Business and Economics Daffodil International University Submitted by: Mujahed Hossin 113-14-588 Mortazur Rahman 113--14-587 S. M. Mahedi Hasan 121-14-688 Raihanul Haque 121-14-689 Submission date: August 23th, 2009 DAFFODIL INTERNATIONAL UNIVERSITY Letter of Transmittal August 13, 2012 Mr. Mohammed Sakhawat Hossain Assistant Professor Faculty of Business and Economics Daffodil International University 102, Sukrabad, Mirpur Road, Dhanmondi Dhaka-1207. RE: Submission of assignment on “A Business Analysis of Square Pharmaceutical Ltd. Dear Sir, With due earnest honor, we are the students of MBA, have the pleasure to completing and submitting the assignment on “Submission of assignment on “A Business Analysis of Square Pharmaceutical Ltd.”Here, we have analyzed how Square Pharmaceutical Ltd. Manage it’s working capital and use it by observing the low years annual reports. This exercise was interesting as well as source of huge practical knowledge for us. We got the great opportunity to contributing...
Words: 4066 - Pages: 17
...CHAPTER 5—BASICS OF ANALYSIS MULTIPLE CHOICE 1. Statements in which all items are expressed only in relative terms (percentages of a base) are termed: a.|Vertical Statements| b.|Horizontal Statements| c.|Funds Statements| d.|Common-Size Statements| e.|none of the answers are correct| ANS: D 2. In financial statement analysis, ratios are: a.|the only type of analysis where industry data are available| b.|absolute numbers converted to a common base| c.|fractions usually expressed in percent or times| d.|the only indication of the financial position of the firm| e.|none of the answers are correct| ANS: C 3. Denver Dynamics has net income of $2,000,000. Oakland Enterprises has net income of $2,500,000. Which of the following best compares the profitability of Denver and Oakland? a.|Oakland Enterprises is 25% more profitable than Denver Dynamics.| b.|Oakland Enterprises is more profitable than Denver Dynamics, but the comparison can't be quantified.| c.|Oakland Enterprises is only more profitable if it is smaller than Denver Dynamics.| d.|Further information is needed for a reasonable comparison.| e.|Oakland Enterprises is more profitable if it is a larger firm than Denver Dynamics.| ANS: D 4. Which of the following can offer a type of comparison in financial statement analysis? a.|past ratios and figures| b.|industry averages| c.|statistics of competitors| d.|all of the answers are correct| e.|none of the answers are correct| ANS:...
Words: 2469 - Pages: 10
...Financial Statement Analysis Financial statements are the primary information companies publish about themselves. Financial statement analysis is the method used by any interested party to answer questions about a company by extracting the information from company financial statements. Financial statement analysis mainly focuses on investors, since businesses are in business to make profits, financial statements are prepared with shareholders’ in mind. Much of financial statement analysis for investors is relevant to other parties. While the shareholder is concerned with profitability, governmental regulators, short and long term creditors, competitors, and employees are concerned with profitability also. There is also a concern with the riskiness of the business for stockholders’ and employees as well. For the purpose of this paper, I will focus on financial statement analysis in regard to shareholders and short and long term creditors. Stockholders’ (shareholders’) equity can be found on the balance sheet. It is the claim by owners, the residual claim on the assets after subtracting liability claims. This is important to stockholders because it shows the degree of which net operating assets are financed by common equity, financial leverage. The balance sheet is a statement of the company’s investments, from its investing activities, and the claims to the payoffs from those investments. Both assets and liabilities are divided into current and long-term categories...
Words: 617 - Pages: 3
...FALL 2012 | Claremont Financial Advisors | A Financial Statement Analysis on AT&T | | Prepared by | Anita HovsepianQinyi DuOctober 21, 2012 | This report is designed to provide investors with investment recommendations for AT&T Inc. by using financial ratios, DuPont Analysis, and by benchmarking its performance with its closest competitor, Verizon. | I. Introduction AT&T Inc., together with its subsidiaries, provides telecommunications services to consumers, businesses, and other providers worldwide. The company’s Wireless segment offers wireless voice and data communication services. The segment also sells various handsets, wirelessly enabled computers, personal computer wireless data cards and accessories. It also offers voice services, such as local and long-distance, calling card, 1-800, conference calling. The company’s Advertising Solutions segment publishes yellow and white pages directories; and sells directory advertising and Internet-based advertising and local search. In addition, the company provides customer information services1. AT&T (ticker: T) is the largest telecommunication service provider in the US. Verizon Communications Inc. (ticker: VZ) ranks the second while BCE, Inc. (ticker: BCE) being the third. As the telecommunication services companies in the US continue to fight to remain relevant, the industry is in decline. However, telecommunication services almost act like a utility and therefore it is a low reward...
Words: 2894 - Pages: 12
...ANALYSIS OF FIANANCIAL STATEMENT MUSTEHKAM CEMENT LIMITED PRESENTED TO: TAHSEEN MOHSIN PRESENTED BY: MUHAMMAD USMAN GHANI 105221003 (03454657966) PREFACE This is the project of financial statement analysis in which we have to apply the financial technique to doo the financial analysis in deep by firm comparability, by ding credit analysis, making pro forma statements and showing reality in it, we were asked to do long term solvency analysis, profitability analysis and valuation in which we have to calculate expected return through DDM and CAPM model. We do the analysis of whole firm in detail on its financial data, calculate the whole ratios of business through which we can analyze in which position the business is running and what problems are faced by the firm and is the firm having any financial risk or in case of solvency measure the firm has through which it can pay its obligations. The project was full of problem because to apply the financial technique we need financial data have to find out which element have to put in that formula and first time I have visit the KSE site to collect the previous stock price of share which was learning point for me that which place how you have to collect data have to do interpretation. ...
Words: 2794 - Pages: 12
