Financial Statement Analysis

1. RATIO
ANALYSIS

2. RATIO
ANALYSIS
LIQUIDITY
RATIO
SOLVENCY
RATIO
ACTIVITY
RATIO
PROFITABLITY
RATIO

3. PROFITABLITY
RATIOS
• NET PROFIT
• PRICE EARNING
RATIO
• OPRATING PROFIT
MARGIN
LIQUDITY
RATIO
• CURRENT RATIO
• QUICK RATIO
• CURRENT CASH
DEBT COVER
RATIO
ACITIVY RATIO
• INVENTORY
TURNOVER RATIO
• RECEIVABLES
TURNOVER RATIO
• ACCONTS
PAYABLE
TURNOVER RATIO
SOLVANCY
RATIO
• DEBT TO EQUITY
RATIO
• CURRENT ASSETS
TO EQUITY RATIO
• CAPITAL GEARING
RATIO

4. CLASSIFICATION OF RATIOS BY
STATEMENT
BALANCE
SHEET
PROFIT&LOSS
ACCOUNT
MIXED
STATEMENT
1 CURRENT
RATIO
2 LIQUD RATIO
1 GROSS
PROFIT RATIO
2 OPRATING
RATIO
1 STOCK
TURNOVER
RATIO
2 DEBTORS
TURNOVER
RATIO

5. LIMITATION OF RATIO ANALYSIS
 RATIOS ARE BASED ON HISTORICAL (OLD) DATA:OLD FINANCIAL REPORT ARE
USED AND THERE IS NO GUARANTEE THAT PAST RESULT WILL BE CORRESPOND
TO FUTUR RESULTS, e.g. RATIOS FOR 2015WILL BE BASED ON 2014 FIGURES
 USE OF HISTORICAL COST ACCOUNTING:HOW RELEVANT IS THE INFORMATION
IN THE REPORTS WHEN IT IS BASED ON HISTORICALCOST DATA ? DEFINITION
ON ASSET VALUES OVER TIME IS NOT CONSIDERED.
 CHANGES IN ACCOUNTING METHODS (COMPARABILITY):TO MAKE
INFORMATION MORE RELEVENT, MANAGEMENT MAY CHANGE ACCOUTING
METHODS OVER TIME

6. THE LIMITATIONS OF RATIO ANALYSIS
 PICKING AN INDUSTRY BENCHMARK CAN SOMTIME BE DIFFICULT
 PUBLISHED PEER-GROUP OR INDUSTRY AVERAGES ARE NOT ALWAYS
REPRESENTATIVE OF THE FIRM BEING ANALYZED
 AN INDUSTRY AVERAGE IN NOT NECESSARILY DESIRABLE TARGET OR NORM
 ACCUNTING PRACTICES DIFFER WIDELY AMONG FIRMS
 MANY FIRM EXPERIENCE SEASONAL CHANGES IN THEIR OPERATIONS

7.  FORECASTING: IT HELPS IN BUSINESS PLANNING, FORECASTING AND FUTURE
PLANNIG
 LOCATING THE WEAK SPOTS: RATIO ARE OF GREAT ASSISTANCE IN LOCATION
THE WEEK SPOTS IN THE BUSFIRMINESS EVEN THOUGH THE OVERALL
PERFORMANCE MAY BE QUIT GOOD.
 INTER-FIRM AND INTRA-FIRM COMPARISON: A FIRM WOULD LIKE TO COMPAR ITS
PERFORMANCE WITH THAT OF OTHER FIRMS AND OF INDUSTRY IN
GENERAL(INTER-FORM, COMPARISON)AND THE PERFORMED OF DIFFERENT
UNITS BELONGING TO THE SAME FIRM (INTRA-FIRM COMPARITION).

8. ADVANTAGES OF RATIO ANALYSIS
 IT SIMPLIFIES FINANCIAL STATEMENT
 IT HELPS IN COMPARING COMPANIES OF DIFFERENT SIZE WITH EACH OTHER
 IT HELPS IN TREND ANALYSIS WHICH INVIOLVS COMPARING A SINGLE
COMPANY OVER A PERIOD
 IT HIGHLIGHTS IMPORTANT INFORMATION IN A SIMPLE TO USE FORM QUICKLY

9. FINANCIAL STATEMENT ANALYSIS
TO MAKE INFORMED DECISIONS ABOUT A COMPANY
* HELPFUL IN MANAGEING THE COMPANY
* COMPARITION WITH COMPETITION
* ESTABLISH FINANCIAL HELTH
* USED FOR INVESTEMENT DECISIOS
GENERALLY BASED ON COMPARATIVE FINANCIAL DATA
*FORM ONE YEAR TO THE NEXT
* WITH A COMPETING COMPANY
* WITH THE INDUSTRY AS A WHOLE

10. THANK YOU

11. SUBMITED BY
SARANYA.P