Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve--Chapter Twelve     Understanding Financial Statements                   Understanding Financial Statements...
Chapter Twelve – UnderstandingChapter Twelve – Understanding   Financial Statements                                 Financ...
Upcoming SlideShare
Loading in …5
×

Understanding Financial Statements

661 views

Published on

This presentation is designed to guide and help you to understand how to read and analyses the basic financial statement.

For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAc

Published in: Education
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
661
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
27
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Understanding Financial Statements

  1. 1. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Net earnings from operations disclose profitability of a company which can be a respectable figure say Ten crores. But the figure when compared to previous year, say Fifteen crores, shows a significant dip.
  2. 2. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Trends over years & Financial Ratios
  3. 3. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios We study three types of Ratios Profit Ratios Balance Sheet Ratios Debt Paying Ability Ratio
  4. 4. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios Profit Ratios Gross Profit Gross Return on Sales = Total sales a stronger company in the Industry will have a high ratio
  5. 5. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios Profit Ratios Net Profit Net Return on Sales = Total sales a high ratio indicates greater capacity to declare dividends
  6. 6. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios - Profit Ratios Balance Sheet Ratios Net Worth Book Value per share = No of outstanding shares Higher the ratio , stronger the company
  7. 7. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios - Profit Ratios ; Balance Sheet Ratios Debt Paying Ability Ratio – measures solvency of company Current Assets Current Ratio = Current Liabilities Indicates ability to discharge short term liabilities
  8. 8. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios - Profit Ratios ; Balance Sheet Ratios Debt Paying Ability Ratio – measures solvency of company Total Debt Debt Equity Ratio = Net Worth Higher the ratio greater the risk
  9. 9. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios - Profit Ratios ; Balance Sheet Ratios Debt Paying Ability Ratio – measures solvency of company Profit before Interest & Tax Interest Cover Ratio = Interest Higher ratio indicates greater capacity to pay interest
  10. 10. Chapter Twelve--Chapter Twelve Understanding Financial Statements Understanding Financial Statements Financial figures in absolute amounts do not provide complete picture. Hence focus should be on Financial Ratios - Profit Ratios ; Balance Sheet Ratios Debt Paying Ability Ratio – measures solvency of company Annual Sales Revenue Asset Turnover Ratio = Total Assets Higher ratio indicates better utilization of assets
  11. 11. Chapter Twelve – UnderstandingChapter Twelve – Understanding Financial Statements Financial Statements Ultimately,understanding financialstatements is a fine art and callsfor deep understanding of accountingtechniques!

×