Financial Statement Analysis

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Analysis of two company financial statements, with ratio analysis and common sizing.

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Financial Statement Analysis

  1. 1. Financial Statement Analysis Presentation Annakae Wonder Natoya Kelly Shanae Brooks Alex Ellis
  2. 2. Companies in the Spot light Today Sagicor Life Jamaica Limited Guardian Holdings Limited
  3. 3. AGENDA  Factors to consider in undertaking a comprehensive analysis  Valuation methodologies used in recording key components of financial statements.  Cash Flow statements  Identifying audit opinion of companies and the information they convey.  Common size both company financial statements  Ratio Analysis of both companies  Forecasted balance sheet for both companies.
  4. 4. FACTORS TO BE CONSIDER FOR A COMPREHENSIVE ANALYSIS • Economic characteristics • Corporate strategies • Accounting strategy • Regulatory Framework
  5. 5. VALUATION METHODS USED IN RECORDING COMPONENTS OF FINANCIAL STATEMENTS Valuation Methodologies Identified are as Follows: •Historical Cost • Fair Value •Revenue Recognition
  6. 6. Statement of Cash Flow The three main components noted of both company’s Statement of Cash Flow include • The Operating activity • The Investing activity • The Financing activity
  7. 7. The Relationship of the Components The Relationship of the components of Sagicor Life Jamaica Guardian Holdings Statement of Cash Flow • Guardian Holdings Limited gain most of its cash flow from financing and operating activities which is used for investing • Sagicor Life Jamaica limited gained most of its cash flow from operating which is used for investing and to pay back its capital providers.
  8. 8. Audit Opinion and Report What audit opinion was used? The independent auditors of Sagicor Life Jamaica Limited and Guardian Holdings limited both issued an unqualified audit opinion which means there are no identified material weaknesses and there have been no restrictions on the scope of the auditor’s work.
  9. 9. Sagicor Life Jamaica Limited
  10. 10. Sagicor Life Jamaica Limited 2012 2011 2010
  11. 11. Sagicor Life Jamaica Limited 2012 2011 2010
  12. 12. Sagicor Life Jamaica Limited
  13. 13. Sagicor Life Jamaica Limited 2012 2011 2010
  14. 14. Guardian Holdings Limited
  15. 15. Guardian Holdings Limited 2012 2011 2010
  16. 16. Guardian Holdings Limited
  17. 17. Guardian Holdings Limited
  18. 18. Ratio Analysis
  19. 19. Return on Average Assets Return on Average Assets - indicates what a company can do with what it possesses ROAA = Net Income / Total Average Assets
  20. 20. Return on Average Assets Sagicor Life Jamaica Limited – 4% or 0.04 : 1 Guardian Holdings Limited – 1% or 0.01 : 1 General Accident Insurance Company Limited- 8% or 0.08 : 1
  21. 21. Return on Shareholders’ Equity Ratio Return on Capital Employed - is a measure of the returns that a business is achieving from the capital employed. ROCE = Net Income – Preferred Stock dividends/ Average Common Shareholders’ Equity.
  22. 22. Return on Shareholders’ Equity Ratio Sagicor Life Jamaica Limited – 76% or 0.76:1 Guardian Holdings Limited – 13% or 0.13:1 General Accident Insurance Company – 19% or 0.19:1
  23. 23. Current Ratio The current ratio indicates a company's ability to meet short-term debt obligations. The current ratio measures whether or not a firm has enough resources to pay its debts over the next 12 months. Potential creditors use this ratio in determining whether or not to make short-term loans. • Current ratio = Current assets/ Current liabilities
  24. 24. Current Ratio Sagicor Life Jamaica Limited – 126% or 1.26 : 1 Guardian Holdings Limited – 286% or 2.86 : 1 General Accident Insurance Company – 432% or 4.32 : 1
  25. 25. Liabilities to Shareholders’ Equity It measures a company's ability to repay its obligations. If the ratio is increasing, the company is being financed by creditors rather than from its own financial sources which may be a dangerous trend. Lenders and investors usually prefer low debt-to-equity ratios because their interests are better protected in the event of a business decline. Thus, companies with high debt-to-equity ratios may not be able to attract additional lending capital.
  26. 26. Liabilities to Shareholders’ Equity 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 409% 100% 100% 602% 203% Sagicor Life Jamaica Guardian Holdings Ltd Liabilities Equity General Accident
  27. 27. Liabilities to Assets Ratio used to measure a company's financial risk by determining how much of the company's assets have been financed by debt. Liabilities to Assets Ratio = Total Liabilities/ Total Assets
  28. 28. Liabilities to Assets Ratio Sagicor Life Jamaica Limited – 80% or 0.8 : 1 Guardian Holdings Limited – 86% or 0.86: 1 General Accident Insurance Company – 67% or 0.67: 1
  29. 29. Forecasted Balance Sheet Technique – Trend Analysis Factors considered Inflation Rate Changes in Taxation Interest Rate
  30. 30. Sagicor Life Jamaica Limited
  31. 31. Sagicor Life Jamaica Limited
  32. 32. Sagicor Life Jamaica Limited
  33. 33. Guardian Holdings Limited
  34. 34. Guardian Holdings Limited

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