...FINANCIAL MANAGEMENT Financial Statement Analysis The process of determining financial strengths and weaknesses of a firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data. Financial Statement Analysis Metcalf and Titard:It is a process of evaluating the relationship between component parts of a financial statement to obtain a better under standing of a firm’s position and performance. Financial Statement Analysis Purpose:To diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. Types of Financial Analysis On the basis of: The materials used. The modus operandi of analysis – i.e., the method of operation followed in the analysis. Types of Financial Analysis On the basis of materials used: External analysis. Internal analysis. Types of Financial Analysis On the basis of materials used: External analysis. • This analysis is done by outsiders who do not have access to the detailed internal accounting records of the business firm. (Investors, creditors, government agencies, credit agencies and general public.) Types of Financial Analysis On the basis of materials used: Internal analysis. • This analysis is conducted by persons who have access to the internal accounting records of a business firm. (Executives and employees of the organization and government agencies which have statutory powers...
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...Financial Statements Analysis - An Introduction MODULE - 6A Analysis of Financial Statements 27 FINANCIAL STATEMENTS ANALYSIS - AN INTRODUCTION You have already learnt about the preparation of financial statements i.e. Balance Sheet and Trading and Profit and Loss Account in the module titled ‘Financial Statements of Profit and Not for Profit Organisations’. After preparation of the financial statements, one may be interested in analysing the financial statements with the help of different tools such as comparative statement, common size statement, ratio analysis, trend analysis, fund flow analysis, cash flow analysis, etc. In this process a meaningful relationship is established between two or more accounting figures for comparision. In this lesson you will learn about analysing the financial statements by using comparative statement, common size statement and trend analysis. Notes OBJECTIVES After studying this lesson, you will be able to : explain the meaning, need and purpose of financial statement analysis; identify the parties interested in analysis of financial statements; explain the various techniques and tools of analysis of financial statements. 27.1 FINANCIAL STATEMENTS ANALYSIS (MEANING, PURPOSE AND PARTIES INTERESTED) We know business is mainly concerned with the financial activities. In order to ascertain the financial status of the business every enterprise prepares certain statements, known as financial statements. Financial statements are mainly prepared...
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...Presentation On Analysis of Financial Statements. Prepared By: Md. Nazmul Hasan. Analysis of Financial Statements What is Financial Statement Analysis: Financial Statements Analysis is an Analysis of the Following Statements: Income Statement Balance Sheet Statement of Owners Equity and Statement of Cash Flow Purpose of Analysis Financial statement analysis helps users make better decisions. Internal Users Managers Officers External Users Shareholders Lenders Customers Financial Statements Are Designed for Analysis Classified Financial Statements Items with certain characteristics are grouped together. Comparative Financial Statements Amounts from several years appear side by side. Consolidated Financial Statements Information for the parent and subsidiary are presented. Results in standardized, meaningful subtotals. Helps identify significant changes and trends. Presented as if the two companies are a single business unit. Tools of Analysis: Dollar & Percentage Changes Component Percentages Trend Percentages Ratios Dollar and Percentage Changes or Horizontal Analysis Dollar Change: Dollar Change = Analysis Period Amount – Base Period Amount Percentage Change: % Percent Change = Dollar Change ÷ Base Period Amount Dollar and Percentage Changes or Horizontal Analysis ABC, Inc. Comparative Balance Sheets December 31, 2005 Assets Current assets: Cash and equivalents Accounts receivable...
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...Statistical Tools for Financial Research Anna Hemmer University of Phoenix Statistical Tools for Financial Research The financial condition of an organization is identified through data provided in formal records called financial statements. Financial statements provide an accurate account of a company’s financial position and cash flow of the business. Stakeholders used the data to make decisions regarding future purchases, investments, and profitability of the organization. Analyzing financial statements consists of using various methods (statistical tools) including comparative statements, schedule of changes in working capital, common size percentages (analysis), fund analysis, trend analysis, and ratio analysis. The purpose of this paper is to review the financial statements of one domestic, and one global organization from the Financial Times 500. The two companies for review are the McDonald’s and Samsung organizations. The data provided in the financial statements will convert into a ratio analysis. Common size analysis, and accounting analysis limitations are tools for review. The pros and cons of each of these statistical tools will also be discussed. To understand the importance of statistical tools, a review of ratio analysis, common size analysis, and accounting analysis limitation will be the starting point for this paper. Ratio Analysis Ratio analysis is the most powerful tool of financial analysis (Accounting for Management, 2012, para. 1) used...
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... Research Proposal Financial analysis is important for every organization. In the course of financial analysis, it is determines the areas which are to improved by it. Two organizations selected here are Bank of America and HSBC. Both organizations are in the banking sector and have operations in various parts of the world. The organizations work for the purpose of making sure they achieve their targets. The study is conducted for finding out whether these organizations are working appropriately. Background The organization considered presently is Bank of America. This organization is a banking company and engaged in carrying out various kinds of banking operations for customers. “The organization has a total of 57 million clients at the present time” (Carroll, 2007). There are various banking operations carried out by Bank of America. Operations carried out by Bank of America include acceptance of deposits, lending to individuals and businesses, and various financial operations. This organization has been working towards achievement of target goals. For this organization, it is also important to ensure they provide a detailed financial analysis of the company’s operations. The assistance of the financial analysis ensures the company understands and knows their financial position is in order. The organization determines if they are able to meet financial obligations over a period of time. HSBC Holdings is a multinational financial and banking company based in London...
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...Definition of 'Financial Statement Analysis' Financial statement analysis (or financial analysis) is the process of understanding the risk and profitability of a firm (business, sub-business or project) through analysis of reported financial information, by using different accounting tools and techniques. Financial statement analysis is an evaluative method of determining the past, current and projected performance of a company. Several techniques are commonly used as part of financial statement analysis including horizontal analysis, which compares two or more years of financial data in both dollar and percentage form; vertical analysis, where each category of accounts on the balance sheet is shown as a percentage of the total account; and ratio analysis, which calculates statistical relationships between data. Objectives of Financial Statement Analysis The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions (IASB Framework). The major objectives of financial statement analysis are as follows 1. Assessment of Past Performance:Past performance is a good indicator of future performance. Investors or creditors are interested in the trend of past sales, cost of goods sold, operating expenses, net income, cash flows and return on investment. These trends offer a means for judging management's past performance...
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...Financial Statement 1 Financial Statement Analysis YOUR NAME Axia College of University of Phoenix Financial Statement 2 Financial statements are often t he life line of a company. These statements show a company manager how viable the organization is and how profitable it has been. If this financial statement is not interpreted right it could cause the reader to make some serious mistakes when making the firm’s financial decisions. Financial statements provide an overview of the businesses financial conditions. There are four basic types of financial statements. The first is the balance sheet which reports a company’s assets, liabilities and net equity for a certain period. An income statement also known as profit and loss statement reports the company’s income, expenses and profits. The retained earning statement explains the changes in a companies retained earnings over a period. A cash flow statement shows the companies cash flow activities. These figures come from the companies operating, investing and financial activities. To sum things up these statements shows a company where there money has gone and profitable they have been. They shown an overall risk-return profile and if the mix of debt and equity financing is profitable. Lenders such as banks or bond buyers are interested in financial statements because through them they can determine if their interest and principles Financial Statement 3 can...
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...21 1 2 3 4 5 Chapter Twenty-One Analyzing Financial Statements After completing this chapter, you should be able to: Explain the objectives of financial statement analysis. Describe and use the following four analytical techniques: horizontal analysis, trend analysis, vertical analysis, and ratio analysis. Explain the importance of comparisons and trends in financial statement analysis. Prepare and interpret common-size financial statements. Define and compute the various financial ratios discussed in the chapter. CONTEMPORARY INTERIORS TO GO NATIONAL Chicago, IL—Contemporary Interiors, a Chicago tradition in Scandinavian furniture and contemporary design, has announced a decision to go national. Although Contemporary Interiors has opened stores throughout the Midwest in recent years, the company has remained a regional business with the bulk of its sales in the greater Chicago area. Yesterday, however, a company spokesman announced that Contemporary Interiors’ Board of Directors had decided the time was right to make the next move. Marc Janson, spokesman for the firm’s president and CEO, pointed to the strong economy and consumer confidence as being key to the decision. “Disposable income is up, and we’re seeing that in our business,” said Janson. “Even more important, though, is our company’s strong financial position. The analysts tell us that our financial statements look good. Our working capital, inventory turnover, return on assets, and so forth are all strong. This...
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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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...and 75 metropolitan markets of the United States, primarily under the name of D.R. Horton, America’s Builder. It’s among the Fortune 500 Company and its common stock is included in the S&P 500 Index and listed on the New York Stock Exchange. Their size of operations has substantially decreased due to the weakened markets for new homes. Business Strategy The company has maintained significant year-over-year growth and profitability. It achieves this this growth through an operating strategy focused on capturing greater market share, while also maintaining a strong balance sheet. They execute their strategy by investing available capital in their existing homebuilding markets and opportunistically entering new markets. They have been actively been involved in evaluating homebuilding acquisition opportunities as they arose, some of which resulted in acquisitions and contributed to growth in their business. They have enhanced their leverage on general and administrative activities, and this has allowed greater flexibility to compete for greater market share in the markets. Liquidity Analysis A company's liquidity is its ability to meet its near-term obligations, and it is a major measure of financial health. In my analysis, I have provided Current ratio, Quick ration and cash. The current ratio is the most basic liquidity test. It signifies a company's ability to meet its...
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...1. EXECUTIVE SUMMARY Financial analysis is the starting point for making plans, before using any sophisticated forecasting and planning procedures. Understanding the past is a prerequisite for anticipating the future. Financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm, or by parties outside the firm, viz. owners, creditors, investors and others. The nature of analysis will differ depending on the purpose of the analyst. 1. Investors: Who invested their money in the firm’s shares, are most concerned about the firm’s earnings. They more confidence in those firm’s that show steady growth in earnings. As such, they concentrate on the analysis of the firm’s present and future profitability. They are also interested in the firm’s financial structure to that extent influence the firm’s earning ability and risk. 2. Trade creditors and financial institution: they are interested in firm’s ability to meet their claims over a very short period of time. Their analysis will, therefore, confine to the evolution of the firms liquidity position. And the financial institutions are interested in the financial statements of the borrowing concern to ascertain its short- term as well as long-term solvency and also it profitability. 3. Suppliers: On the other hand, are concerned...
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...that refreshes their outlook, stimulates their senses and inspires hope and optimism. Company Profile of Pepsi Co. Pepsi Co. is one of the leading global beverage, snack and food company, having its headquarters in Purchase, NY. Pepsi market and sell a variety of convenient, salty, sweet, grain based snacks, carbonated and non-carbonated beverages and foods in more than 200 countries, having their largest operations in United States of America, Canada, Mexico and United Kingdom. Pepsi markets and owns many brands as Quaker, Oats, Gatorade, Frito-Lay, CoBe, Naked, Topricana, Mountain Dew, Mirinda, Copella. The commitment of Pepsi is to achieve a sustainable growth i.e. Performance with purpose, which is focused on generating healthy financial returns and serving its customers. This includes meeting consumer needs for a spectrum of convenient foods and beverages, reducing their impact on the environment through water, energy and packaging initiatives, and supporting their employees through a...
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...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...
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...Financial statements provide information to a number of internal and external stakeholders regarding the financial health of an organization. An important aspect of financial statements is using ratios for comparison purposes. The ability to analyze ratios allows stakeholders to compare against time periods or benchmark against other organizations. “The five major classes of financial statement ratios are common size, liquidity, solvency, efficiency, and profitability” (Finkler & Jones, p.117, 2007). This paper will summarize common financial ratios and will provide examples of ratio analysis from Hospital Corporation of America’s (HCA) financial statements, as well as determine what factors may affect the results. Concept and Purpose of Ratio Analysis Financial ratio analysis is a common method of comparing the relationship between two numbers (Finkler & Jones. 2007). Analyzing various financial and operational measurements allows internal and external users to understand the financial health of an organization as well as monitor trends within the financial statements. Comparisons of ratios can be performed by analyzing different time periods, comparisons to industry standards, or benchmark against competitors (Cleverly, Song & Cleverly, p.248, 2011). The five major classes of ratio analysis are common size, liquidity, solvency, efficiency, and profitability. Below are the purpose, influential factors, and formulated examples of each class of ratios. The examples provided...
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...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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