...FINANCIAL DECISION MAKING FOR MANAGERS: Ratio And Financial Statement Analysis NAME: JAMES B. TAYLOR DATE: 04/09/2015 Table of Content I. Executive Summary.....................................................................................3 II. Introduction..................................................................................................4 III. Financial statements tools and techniques...................................................4 IV. Exhibits…………………………………………………………………...10 V. Analysis of Results.....................................................................................11 VI. Recommendations……………………………….......................................13 VII. Conclusions……………………………………………………………….13 VIII. References………………………………………………………………...14 Executive summary This paper is focused to assess financial health of a business firm. I have chosen one of the leading retail companies in the country (Higgins, 2011). This paper will carry out a financial analysis on Hamster Limited in order to have a comprehensive assessment about its financial health analysis. This paper will analyze and assess the financial environment in which the company operated. Through a comprehensive analysis, my objective is to understand the influence of financial factors in the firm and its decision making. I will evaluate different ratios to acknowledge their impact on Hamsters performance over the few years. I will identify, assess and interpret...
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...major components of Sugar Investment Trust (SIT) annual report: 3 3.0 The Five potential users 5 4.0 How useful are companies’ annual reports in addressing the needs of users of accounts? 6 5.0 Company’s Corporate Social Responsibility (CSR) 8 6.0 To what extent does the regulatory framework govern the preparation of an Annual Report? 9 7.0 To what extent reported profit figures can mislead users of accounts? 10 8.0 Cash flow statements 11 9.0 Accounting Ratios and Cash Flow Statement Analysis 11 10. Cash Flow Statement Analysis 14 11. Criticism of traditional financial accounting and problems encountered in inter-firm comparison. 14 12. Contribution list 16 13. References 16 1.0 Introduction T he Sugar Investment Trust (SIT) is a body corporate established under an Act of Parliament in 1994 which operates as a company under the Companies Act 2001. It is the largest shareholder based public company in Mauritius with more than 40,000 members. It has more than 55,000 shareholders. The foundation of Sugar Investment Trust (SIT) constitutes a landmark in the Mauritian history. It was set up primarily as a participation scheme in the sugar industry but it has become a model of economic democratisation in the country. It provides a forum for participation of planters and workers at corporate decision making level of sugar milling companies and as equity participation. Therefore, it ensures a share of profit with a fair rate of return on investment to all...
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...Financial Analysis I think that when it comes down to it PepsiCo and Coca Cola are companies that been around for a very long time and have established relationships with their brands with consumers all over the world. The purpose of this paper is to help breakdown both companies by explaining both financial positions along with showing their strengths. Listed below in this paper are going to be examples that show vertical, horizontal and ratio analysis. The calculations that have been conducted which are listed below are basically intended as a visual to help show which company may appear more secure. Along with that I will provide some recommendations that may seem to help improve the growth of each company. There are a few tools that are used to help evaluate financial statements and that are quite used often in accounting and those tools are Horizontal Analysis, Vertical Analysis and Ratio Analysis. In the preliminary calculation which will be the Vertical Analysis which is often defined as “common size. When it comes down to it this analysis objective is to basically assess the company’s financial statements by assigning certain percent from the base amount to each item of financial statements; this type of evaluation is often used for inter-and intra-company needs according to (Weygandt, Kimmel, Kieso, 2008). A really good example of vertical analysis that is calculated for PepsiCo generally shows and compares its assets in number and percent figures for 2004 and...
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...conducts an in-depth financial analysis of Caterpiller Inc. (CAT). The use of various analytical tools, the assignment covered major fundamental parameters relating the company and its stock. The analysis consisted of stock reporting analysis, ratio analysis, duo point analysis, weekly return analysis and the analysis of cost of equity. The stock reporting analysis part of the project analyzed the stock selected with respect to the market Index. For the purpose of analysis the prices of both stock and index were downloaded for the period beginning 15-Jan-2009 till 15-Nov-2011. Ratio analysis had been used as the primary tool for evaluating the performance of the company. The ratio analysis helps in analyzing the probable casual relationships among different items after analyzing the past results. These ratios are derived after analyzing the past results and helps management to prepare budgets, to formulate policy and to prepare future plan. Ratio analysis also helps in making inter firm comparison and also comparisons between different divisions of the company. The required rate of return of CAT is calculated with the help of CAPM model. The model explains the relationship between the systematic risk associated with a stock and its expected return. In this model a stock’s expected return is the risk free rate of return (generally return on Govt. Treasury bonds is taken as risk free rate of return) plus a risk premium based on the stock’s systematic risk. Analysis Stock Reporting...
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...FINANCIAL STATEMENT ANALYSIS: A TOOL FOR PERFORMANCE EVALUATION A Case Study of Oceanic Bank By IBRAHIM UMAR PGA/09/07766 M.Sc. Assignment Submitted to Dr. M.I. Kida CNA Department of Accountancy University of Maiduguri 2Financial Statement Analysis: A Tool for Performance Evaluation Jan. 2010 3Financial Statement Analysis: A Tool for Performance Evaluation ABSTRACT Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, trend analysis and ratios analysis. This study intends to analyze financial statement of Oceanic bank in Nigeria in order to come up with an in-depth fact finding on its performance and to see if there is any connection between the recent global economic crisis and its overall performance. 4Financial Statement Analysis: A Tool for Performance Evaluation INTRODUCTION 1.1 Background Financial statement represents...
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...The project mainly focuses in detail the Financial Ratios and also understanding of the working capital management of IRCTC. This report will analysis and describe different ratios and how it manages its working capital. “It is meaningless to financially analyse a company without understanding the context and environment in which it operates”. As IRCTC has its monopoly in Indian Railways, so we will take a close look to intra firm analysis. A ratio is an arithmetical relationship between two figures. Financial ratio analysis is a study of ratios between various items or groups of items in financial statements. Ratios can be classified according to statements mainly they are profit and loss ratios or income statement ratios, balance sheet ratios or position statement ratios, mixed ratio or inter statement ratios The ratios are calculated with the help of Annual report of IRCTC provided by the company; the data of last five financial years has been used for that. The project begins with the discussion about the scenario of Indian Railway and role of IRCTC in that. The project then describes the main concept- Ratios and their analysis by determining that why the ratios have changed, which can be due to the change in the accounting policies without a material change in the firm’s performance. The focus of the project then shifts to Working capital which is concerned with the problems that arise in attempting to manage current assets, the current liabilities and the interrelationship...
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...Kudler Fine Foods Financials Kudler Fine Foods Financials Kudler Fine Foods is a local San Diego retailer of specialty food items with three upscale stores in La Jolla, Del Mar, and Encinitas. They provide the finest domestic and imported food items at reasonable prices. The store’s founder, Kathy Kudler, built the enterprise based on her vision of selecting and purchasing only the finest of products, offering customers a delightful and pleasing shopping experience, and becoming a purveyor of choice for customers seeking to purchase the best epicurean. The members of Team C learning team analyzed the financial statements of Kudler Fine Foods by making comparisons at the intra-company level, industry averages, and with other competing companies (inter-company basis). Team C used horizontal analysis, vertical analysis, and ratio analysis to assess the significance of Kudler’s financial data. Team C presents the numerical data below, followed by the analysis of the financial statements. Financial Ratios Kudler Industry Average Safeway Current Ratio 16.94:1 1.96:1 0.83:1 Quick Ratio 13.04:1 0.73:1 0.27:1 Receivable Turnover 125.5X Not avail 72X Average Collection Period 3 days Not avail 5 days Inventory Turnover 19.8X 9.65X 12.5X Days in Inventory 18.43 days 38.82 days 29.20 days Asset Turnover 4.03X 4.0X 2.89X Profit Margin 6.2% 5.2% 1.18% Return on Assets 25.3% 3.1% 5.8% Return on Common SE 90% 9.0% 11.91% Debt...
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...9 Ratio Analysis Introduction The analysis of the financial statements and interpretations of financial results of a particular period of operations with the help of 'ratio' is termed as "ratio analysis." Ratio analysis used to determine the financial soundness of a business concern. Alexander Wall designed a system of ratio analysis and presented it in useful form in the year 1909. Meaning and Definition The term 'ratio' refers to the mathematical relationship between any two inter-related variables. In other words, it establishes relationship between two items expressed in quantitative form. According J. Batty, Ratio can be defined as "the term accounting ratio is used to describe significant relationships which exist between figures shown in a balance sheet and profit and loss account in a budgetary control system or any other part of the accounting management." Ratio can be used in the form of (1) percentage (20%) (2) Quotient (say 10) and (3) Rates. In other words, it can be expressed as a to b; a: b (a is to b) or as a simple fraction, integer and decimal. A ratio is calculated by dividing one item or figure by another item or figure. Analysis or Interpretations of Ratios The analysis or interpretations in question may be of various types. The following approaches are usually found to exist: (a) Interpretation or Analysis of an Individual (or) Single ratio. (b) Interpretation or Analysis by referring to a group of ratios. (c) Interpretation or Analysis of ratios by trend...
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...three tools of financial statement analysis and functions are the horizontal, vertical, and ratio analysis. The horizontal ratio also called the trend ratio, evaluates financial statements and data over a certain period of time. It is mainly used in intra- company comparisons. The purpose of this is to determine the decrease or increase that took place. The vertical analysis also called the common- size analysis, evaluates the financial statement data by expressing each item as a base amount or a percentage in the financial statements. It is used in both inter- and intra- company comparisons. The ratio analysis expresses the relationships among selected items of financial statement data, which is used in all three types of comparisons. So the current ratio for 2004 would be $8639 which is the total assets divided by $6752 the total liabilities, which is equal to 1.28% For 2005 it’s the same scenario divide the current assets $10454 by $9406, (total liabilities) equal to 1.11% The two measures of vertical analysis is current assets or $10,454 $31,727 = 33% (Divide the two to get this amount.) The two measures of horizontal analyses are current assets in 2005- $10,454 Divided by Current assets in 2004- $8,639 = 121% or a 21% increase from 2004 to 2005. Current liabilities in 2005 are $9,406. Divide that by current liabilities in 2004 or $6752 which equals 139% or 39% increase from 04 to 05. For the Coca-Cola Co, to get the current ratio you divide the...
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...INTRODUCTION OBJECTIVE: To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm. RATIO ANALYSIS: Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future. MEANING OF RATIO: A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship two figures, which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of...
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...2011. Pp. 148 - 164 Significance of Management Accounting Techniques in Decision-making: An Empirical Study on Manufacturing Organizations in Bangladesh Farjana Yeshmin* and Md. Amran Hossan** Management accounting is concerned with gathering and reporting internal financial information to facilitate decision-making process. As management accounting is not required to conform to national accounting standards, it allows business to customize the management accounting techniques as per demand of company. As a process of this customization, some advanced quantitative as well as number of qualitative techniques accompany with the traditional techniques, have been emerged to cater the information need in decision making. This study attempts to measure the significance of management accounting techniques in decision making of the selected manufacturing organizations in Bangladesh. In doing so, a total of 74 manufacturing organizations have been surveyed with a structured questionnaire by using 5 point Likert Scale measurement from different categories of manufacturing organizations. Findings reveal that cash flow statement analysis, ratio analysis, budgetary control, CVP analysis, variance analysis and fund flow analysis have been frequently high-ranking techniques. Secondly, the authors have recognized five factors to calculate the variability in decision-making with the help of rotated component matrix which shows that 75.125 % of the total variability has found in the usage of management...
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...Financial Management Essay Benjamin Gray University of Maryland University College 7/31/16 Executive Summary The function of this essay is to examine why ratio and financial statement analysis are useful to any corporations. The ratio analysis is a useful tool for managers and investors that would like to evaluate the company’s financial health. By using this analysis companies are able to identify opportunities for growth and areas of weakness to determine where corporations can put in place corrective measures in order to rectify their areas of weakness. Financial statements are used in order to predict trends of cash flow within the business as well as predict the potential of a business and if they are capable of financial growth. Ratio analysis allows companies to analyze the future revenue of a company’s profit or a company’s loss. This paper will examine the benefits and limitations of ratio analysis, explain what factors impact the meaningfulness of such measures and what new practices or theories may be emerging regarding the application of ratio and financial statement. The paper concludes that ratio and financial statements is an essential tool used in analyzing a company’s profit. Close your eyes and think about all of the products you have consumed today. You purchased lunch from McDonald’s, used Google to help you find directions, drove your Toyota to work and grabbed...
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...importance of financial analysis for the company as financial Statements are useful as they provide information that allows investors and creditors to make better decisions. However, because of selective reporting of economic events as well as non-comparable accounting methods and estimates, financial statements are only an approximation of reality. In addition, because of the tendency to delay accounting recognition, financial statements also tend to lag reality. * A primary objective of financial analysis is to determine comparable risk and return of companies and their securities. Financial statements include the * Balance Sheet * Income Statement * Cash Flow Statement * The financial statements are interrelated and are used and analysed together. Methods of financial statement analysis are divided into two general categories, internal analysis and comparative or external analysis. * Internal analysis uses figures from the financial statements of any one date or period to gain an understanding of the customer. Comparative analysis is used to determine trends when two or more successive sets of figures are reviewed, or is used to evaluate the company's financial statement against industry standards. * These methods are used separately or in combination. They are part of the tools that enable experienced credit professionals to reach a credit decision. Financial statements are spread and analyzed, with appropriate ratios and flows...
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...Raju Sharma COMPARING AND ANALYZING FINANCIAL STATEMENTS TO MAKE AN INVESTMENT DECISION Case Study of Automotive Industry Business Economics and Tourism 2012 1 VAASAN AMMATTIKORKEAKOULU UNIVERSITY OF APPLIED SCIENCES Bachelor of Business Administration ABSTRACT Author Title Raju Sharma Comparing and Analyzing Financial Statements to Make an Investment Decision: Case Study of Automotive Industry. Year 2012 Language English Pages 72 + 5 Appendices Name of Supervisor Jukka Paldanius The purpose of the thesis was to evaluate and compare the financial statements of different companies to rate their performances. The emphasis was to be able to choose among several companies the best one to invest in. The aim of the study was met by comparing the risk of different companies, their rate of return, future trends and their strengths and weaknesses. In the theoretical section of the thesis different factors affecting the capital market were discussed, with the focus being on the risks of an investment. Basic financial statements and ratios were discussed briefly. Next cross sectional and time series techniques to compare the financial statements and ratios were revealed. Most of the information from the theories was later on used in the empirical part of the thesis. In the empirical study, initially the financial statements of different companies were taken to compute the ratios, risk, average return, to make trends and common size statements. Then a quantitative interpretation...
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...There are two major companies in the world that sell and manufacture soda or pop however you might say it and that is Pepsi and Coca-Cola. We all know that these two companies are constantly in competition to be the number one manufacturer and distributor of beverages in the world. Pepsi and Coca-Cola are very well known in the beverage community around the world. When a company like either of these two has dominated the markets worldwide then they will receive universal recognition for their very different but similar products. I believe that there are many other manufacturers and distributors of beverages in the world there really is no other company that can compete in my mind. Pepsi and Coca-Cola not only do make soda drinks, but they also produce flavored water, spring water, and some energy drinks. We all know that Pepsi is best known for Pepsi and that Coca-Cola is best known for Coke, but because of their great marketing ability and because of this they are able to target people from all around the world. Pepsi and Coca-Cola have great marketing and low prices that make it easy for people to buy their products no matter how much these people earn or where they live at in the world. I would like to start by examining both company’s income statements and balance sheets to see how each company is doing financially. I will also like to perform vertical and horizontal analysis from their annual report of financial data. There are a vast amount of manufacturers and distributors...
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