Financial analysis
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financial analysis techniques of financial analysis 1 internal analysis 2 sort term analysis 3 vertical analysis comparative financial statnents 1 trend analysis 2 ratio analysis
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Ratio Analysis in Accounting
Ratio: It is the quantitative relation between two amounts showing the number of times one value contains or is contained within the other.
Accounting Ratio: It means ratio calculated on the basis of accounting information.
Ratio analysis: A ratio analysis is a quantitative analysis of information contained in a company's financial statements. Ratio analysis is used to evaluate various aspects of a company's operating and financial performance such as its efficiency, liquidity, profitability and solvency.
Ratios are categorized into following basic categories:
1. Liquidity Ratios
2. Solvency Ratios
3. Activity or Turnover Ratios
4. Profitability Ratios
Retained earning
The document defines retained earnings as a statement showing how much of a firm's earnings were retained rather than paid out as dividends. The retained earnings statement reconciles the beginning and ending balances by showing increases from net income and decreases from dividends paid. Retained earnings are accumulated for purposes like funding fixed asset investments and meeting working capital needs. The calculation takes the beginning retained earnings, adds net income, and subtracts dividends paid to arrive at the ending retained earnings balance.
Accounting basics
Accounting is defined as the art of Recording, Classifying and Summarizing transactions in monetary terms (in Money terms) for preparation of Financial Statements
Book- keeping includes recording of journal, posting in ledgers and balancing of accounts. All the records before the preparation of trail balance is the whole subject matter of book- keeping.
Accounting, is an information system is the process of identifying, measuring and communicating the economic information of an organization to its users who need the information for decision making.
financial statement analysis
This document provides an overview of financial statement analysis. It discusses evaluating business prospects and risks through credit analysis, equity analysis, accounting analysis, and financial analysis. These analyses examine a company's liquidity, solvency, profitability, and cash flows. Ratio analysis and valuation methods are also covered. The purpose is to evaluate a company's performance and financial position over time using its financial statements and additional information.
DuPont Analysis
DuPont analysis is a useful technique to break down the different return on equity (ROE) generators. The ROE decomposition helps investors to concentrate separately on key indicators of financial success to define strengths and weaknesses.
Three main financial metrics drive equity return (ROE): operating performance, asset usage performance, and financial leverage. Operating output is a net profit margin or a net income separated by overall revenue or profits.
The efficiency of asset usage is determined by the turnover ratio of the assets. Leverage is calculated by the equity multiplier, equal to average assets divided by average equities.
The component parts of a firm's return on equity (ROE) are calculated using a DuPont analysis. This allows an investor to assess, which financial activities contribute the most to the ROE changes
Financial ratio analysis
This document discusses ratio analysis and provides a comparison of ratio analyses between two prominent Bangladeshi banks, AB Bank Limited and Eastern Bank Limited, from 2012 to 2016. Ratio analysis involves calculating and presenting relationships between financial statement items to analyze a company's financial position and performance over time and compared to other companies. The document analyzes several key ratios for the two banks, including the advances to deposits ratio, non-performing loan ratio, capital adequacy ratio, cost to income ratio, return on equity, return on assets, earnings per share, and book value per share. It finds that Eastern Bank Limited generally demonstrated better performance and financial stability based on these ratios over the period analyzed.
Financial reporting presentation_1
The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
Cash Flow Statement
This document provides information on management accounting and cash flow statements. It defines management accounting as the presentation and analysis of business information for internal management decision making. It then defines a cash flow statement as a financial statement showing the changes in cash and cash equivalents resulting from operating, investing, and financing activities. The objectives of the cash flow statement are to present the inflows and outflows of cash over a period and to help evaluate a company's liquidity, dividend-paying capacity, and reasons for changes in cash balances. Advantages include assessing liquidity and profitability, determining optimal cash balances, and aiding capital budgeting decisions.
Recommended
Ratio Analysis in Accounting
Ratio: It is the quantitative relation between two amounts showing the number of times one value contains or is contained within the other.
Accounting Ratio: It means ratio calculated on the basis of accounting information.
Ratio analysis: A ratio analysis is a quantitative analysis of information contained in a company's financial statements. Ratio analysis is used to evaluate various aspects of a company's operating and financial performance such as its efficiency, liquidity, profitability and solvency.
Ratios are categorized into following basic categories:
1. Liquidity Ratios
2. Solvency Ratios
3. Activity or Turnover Ratios
4. Profitability Ratios
Retained earning
The document defines retained earnings as a statement showing how much of a firm's earnings were retained rather than paid out as dividends. The retained earnings statement reconciles the beginning and ending balances by showing increases from net income and decreases from dividends paid. Retained earnings are accumulated for purposes like funding fixed asset investments and meeting working capital needs. The calculation takes the beginning retained earnings, adds net income, and subtracts dividends paid to arrive at the ending retained earnings balance.
Accounting basics
Accounting is defined as the art of Recording, Classifying and Summarizing transactions in monetary terms (in Money terms) for preparation of Financial Statements
Book- keeping includes recording of journal, posting in ledgers and balancing of accounts. All the records before the preparation of trail balance is the whole subject matter of book- keeping.
Accounting, is an information system is the process of identifying, measuring and communicating the economic information of an organization to its users who need the information for decision making.
financial statement analysis
This document provides an overview of financial statement analysis. It discusses evaluating business prospects and risks through credit analysis, equity analysis, accounting analysis, and financial analysis. These analyses examine a company's liquidity, solvency, profitability, and cash flows. Ratio analysis and valuation methods are also covered. The purpose is to evaluate a company's performance and financial position over time using its financial statements and additional information.
DuPont Analysis
DuPont analysis is a useful technique to break down the different return on equity (ROE) generators. The ROE decomposition helps investors to concentrate separately on key indicators of financial success to define strengths and weaknesses.
Three main financial metrics drive equity return (ROE): operating performance, asset usage performance, and financial leverage. Operating output is a net profit margin or a net income separated by overall revenue or profits.
The efficiency of asset usage is determined by the turnover ratio of the assets. Leverage is calculated by the equity multiplier, equal to average assets divided by average equities.
The component parts of a firm's return on equity (ROE) are calculated using a DuPont analysis. This allows an investor to assess, which financial activities contribute the most to the ROE changes
Financial ratio analysis
This document discusses ratio analysis and provides a comparison of ratio analyses between two prominent Bangladeshi banks, AB Bank Limited and Eastern Bank Limited, from 2012 to 2016. Ratio analysis involves calculating and presenting relationships between financial statement items to analyze a company's financial position and performance over time and compared to other companies. The document analyzes several key ratios for the two banks, including the advances to deposits ratio, non-performing loan ratio, capital adequacy ratio, cost to income ratio, return on equity, return on assets, earnings per share, and book value per share. It finds that Eastern Bank Limited generally demonstrated better performance and financial stability based on these ratios over the period analyzed.
Financial reporting presentation_1
The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
Cash Flow Statement
This document provides information on management accounting and cash flow statements. It defines management accounting as the presentation and analysis of business information for internal management decision making. It then defines a cash flow statement as a financial statement showing the changes in cash and cash equivalents resulting from operating, investing, and financing activities. The objectives of the cash flow statement are to present the inflows and outflows of cash over a period and to help evaluate a company's liquidity, dividend-paying capacity, and reasons for changes in cash balances. Advantages include assessing liquidity and profitability, determining optimal cash balances, and aiding capital budgeting decisions.
Ratio analysis
This document discusses various types of financial ratios used for ratio analysis. It defines ratio analysis as a technique used to analyze and interpret financial statements to help with decision making. It then covers different types of ratios including liquidity ratios, activity ratios, solvency ratios, profitability ratios, and market test/valuation ratios. Specific ratios discussed include current ratio, quick ratio, inventory turnover ratio, debt-equity ratio, return on equity, earnings per share, and others. The document provides formulas and explanations for calculating and interpreting these various financial ratios.
Financial statement analysis types & techniques
The document provides an overview of financial statement analysis. It discusses that financial analysis identifies the financial strengths and weaknesses of a firm by establishing relationships between balance sheet and profit/loss statement items. The key objectives of financial analysis are to evaluate a firm's profitability, debt servicing ability, business risk, and growth. Various techniques of financial analysis are also outlined, including comparative statements analysis, common-size analysis, trend analysis, and ratio analysis. The document aims to explain the concepts and applications of financial statement analysis.
INTRODUCTION TO MANAGEMENT ACCOUNTING
Management accounting is the process of analyzing business costs and operations to prepare internal reports and records to aid managers' decision-making. It involves collecting accounting information using financial and cost accounting and translating it into useful information for management. The objectives of management accounting include measuring performance, assessing risk, allocating resources, and presenting financial statements. It uses tools like budgeting, variance analysis, and cash flow analysis to help managers with planning, decision-making, and control.
Scope of Management Accounting
Management accounting provides essential financial information and analysis to management for planning, decision-making, and controlling business operations. It includes collecting and reporting data on cost accounting, budgeting, financial performance, taxation, and internal controls. The management accountant modifies and presents this information in a way that helps management evaluate alternatives, communicate goals to different departments, monitor performance, and take corrective actions to maximize profits.
Analysis of financial statement
This document provides an overview of financial statement analysis for a company called Basket Wonders. It includes sample financial statements for Basket Wonders including a balance sheet and income statement. It then discusses various types of ratio analysis that can be used to analyze the financial statements including liquidity ratios, leverage ratios, coverage ratios, and activity/turnover ratios. It calculates these ratios for Basket Wonders and compares them to industry averages to identify areas of strength or weakness for the company. Key findings include potential issues with Basket Wonders' inventory levels and lower than average profitability.
accounting process
The document provides an overview of the accounting process. It defines accounting and discusses its key principles and concepts. It describes the different branches and types of accounting. It then explains the accounting process which involves identifying transactions, preparing documents, recording transactions in a journal, posting to ledgers, preparing trial balances and final accounts such as profit and loss statements and balance sheets. It also discusses the different books of accounts used such as journals, ledgers and trial balances. Finally, it covers accounting systems and basics such as debits and credits, types of accounts and how to prepare and balance accounts.
Basic accounting principles
The document discusses key accounting principles including the four main financial statements, the basic accounting equation, and different types of accounts. It also covers topics like accrual versus cash accounting, depreciation, financial analysis methods, and financial ratios used to evaluate business performance and health. The document is intended to provide an overview of basic accounting concepts.
Types of Ratio analyis and their significance
Ratio analysis is used to analyze financial statements and determine key metrics and relationships between items. It can help management with forecasting, planning, control, and decision making. There are various types of ratios that provide different insights. Liquidity ratios like current and quick ratios measure a company's ability to meet short-term obligations. Leverage or capital structure ratios like debt-to-equity examine how the company is financing its assets and level of financial risk. Activity/turnover ratios review how efficiently a company uses its assets. Profitability ratios assess return on sales, assets, and equity. Ratio analysis provides both opportunities to understand a business better but also has some limitations to consider.
Shiltscpa accounting 101 presentation
The document provides an overview of accounting concepts and financial statements for attorneys. It covers topics such as financial statements and tax returns, financial analysis, advisory functions, and client risks and opportunities that can be identified from statements and returns. The document defines accounting and discusses the accounting equation, balance sheet, income statement, statement of cash flows, and components of personal and business tax returns. It emphasizes how statements and returns can provide both obvious and not-so-obvious insights about clients' financial health, risks, opportunities, and more.
Funds flow statement
The document discusses funds flow statements and their preparation. It provides definitions of key terms like working capital and flow of funds. It explains that a funds flow statement depicts changes in working capital between two balance sheet dates by analyzing changes in current assets and current liabilities. The summary also shows how to prepare schedules of changes in working capital and sources and uses of funds statements to analyze the flow of funds.
Accounting concepts
Accounting concept refers to the
Basic assumptions
Rules
Principles
which work as the basis of recording of business transactions and preparing accounts.
Difference between cost accounting ,financial accounting and
The document compares and contrasts financial accounting, cost accounting, and management accounting. Financial accounting provides information to external parties and focuses on reporting profits and financial position. Cost accounting provides information to management for planning, operations, control, and decision making. It breaks costs down on a unit basis. Management accounting helps managers make effective decisions and uses both historical and predictive information. It has a broader scope than cost accounting.
Ratio Analysis - Meaning and Types
Ratio analysis is a quantitative method used to assess the liquidity, performance, solvency and profitability of a company by analyzing financial statement values as percentages rather than line items. It simplifies financial statements, allows comparison between companies of different sizes, and highlights key data. However, comparisons between companies in different industries may be ambiguous, accounting practices can vary, and it focuses on past data rather than future performance.
Ratio analysis
The document discusses ratio analysis and various types of financial ratios used to analyze the financial performance and position of a company. It defines key liquidity ratios like current ratio and quick ratio. It also explains leverage ratios such as debt-equity ratio and total debt ratio that measure the use of debt financing. Further, it covers activity ratios including inventory turnover ratio and debtors' turnover ratio that assess efficiency of inventory and receivables management. The document emphasizes the importance of ratio analysis and interpretation of ratios with industry benchmarks.
Account
The document defines accounting as recording, classifying, and summarizing financial transactions and events to prepare financial statements. It discusses the basic accounting concepts like the accounting equation, assets, liabilities, equity, revenues and expenses. It also explains the key steps in accounting cycle which includes recording transactions, posting to ledger accounts, preparing an unadjusted trial balance, making adjusting entries, preparing an adjusted trial balance and financial statements, and closing temporary accounts. The accounting cycle aims to generate useful financial information for decision making in the form of income statement, balance sheet, and other financial reports.
Accounts and its functions
Accounting records, classifies, and summarizes business transactions to provide financial information to both internal and external users. It aims to determine profits and financial position, facilitate management control, and assess tax liability. However, accounting has limitations as it uses monetary values and estimates, and may be manipulated. The main accounting systems are cash basis, accrual basis, and mixed basis. Stakeholders like shareholders, creditors, management, employees, and the government rely on accounting information for decision making.
Introduction to accounting
This document provides an introduction to the concepts of accounting. It defines accounting as a system that collects and processes financial information to allow informed decisions by users. It discusses the need for accounting to determine results of business transactions and the financial position. It outlines the key functions of accounting like identifying, recording, classifying, summarizing, analyzing, interpreting and communicating financial information. It also discusses the accounting cycle and different branches and users of accounting information. Finally, it provides definitions of some basic accounting terms.
FINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT, ROLE OF FINANCIAL MANAGEMENT, IMPORTANCE OF FINANCIAL MANAGEMENT, FEATURES OF FINANCIAL MANAGEMENT, SCOPE OF FINANCIAL MANAGEMENT, FUTURE OF FINANCIAL MANAGEMENT, etc.
Financial statement analysis
This document provides an introduction to financial statement analysis. It discusses the key types of financial statements, including the income statement, balance sheet, statement of changes in owner's equity, and statement of changes in financial position. It also outlines different classifications and techniques for analyzing financial statements, such as external vs internal analysis, horizontal vs vertical analysis, comparative statement analysis, trend analysis, common size analysis, funds flow analysis, cash flow analysis, and ratio analysis. The overall purpose is to introduce the reader to how financial statements are constructed and various methods for evaluating the financial and operational performance of a business based on its financial reporting.
INVESTMENT DECISION
Investment Decision — Capital Budgeting Techniques — Pay Back Method — Accounting Rate Of Return — NPV — IRR — Discounted Pay Back Method — Capital Rationing — Risk Adjusted Techniques Of Capital Budgeting. — Capital Budgeting Practices
Data Analytics for Accounting - Financial Statement Analytics
This document discusses various types of financial statement analytics used in accounting. Descriptive analytics include ratio analysis to evaluate relationships between financial items and assess a company's performance. Vertical analysis shows financial statement items as a percentage of a base figure. Horizontal analysis compares historical financial data year-over-year. Diagnostic analytics use benchmarks to provide context for a company's performance relative to competitors. Predictive analytics aim to forecast future performance. XBRL facilitates computer-readable financial reporting and supports timely financial analysis.
Analysis
analysis and interpretation of financial statements - financial management - management accounting - financial accounting
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This document discusses various types of financial ratios used for ratio analysis. It defines ratio analysis as a technique used to analyze and interpret financial statements to help with decision making. It then covers different types of ratios including liquidity ratios, activity ratios, solvency ratios, profitability ratios, and market test/valuation ratios. Specific ratios discussed include current ratio, quick ratio, inventory turnover ratio, debt-equity ratio, return on equity, earnings per share, and others. The document provides formulas and explanations for calculating and interpreting these various financial ratios.
Financial statement analysis types & techniques
The document provides an overview of financial statement analysis. It discusses that financial analysis identifies the financial strengths and weaknesses of a firm by establishing relationships between balance sheet and profit/loss statement items. The key objectives of financial analysis are to evaluate a firm's profitability, debt servicing ability, business risk, and growth. Various techniques of financial analysis are also outlined, including comparative statements analysis, common-size analysis, trend analysis, and ratio analysis. The document aims to explain the concepts and applications of financial statement analysis.
INTRODUCTION TO MANAGEMENT ACCOUNTING
Management accounting is the process of analyzing business costs and operations to prepare internal reports and records to aid managers' decision-making. It involves collecting accounting information using financial and cost accounting and translating it into useful information for management. The objectives of management accounting include measuring performance, assessing risk, allocating resources, and presenting financial statements. It uses tools like budgeting, variance analysis, and cash flow analysis to help managers with planning, decision-making, and control.
Scope of Management Accounting
Management accounting provides essential financial information and analysis to management for planning, decision-making, and controlling business operations. It includes collecting and reporting data on cost accounting, budgeting, financial performance, taxation, and internal controls. The management accountant modifies and presents this information in a way that helps management evaluate alternatives, communicate goals to different departments, monitor performance, and take corrective actions to maximize profits.
Analysis of financial statement
This document provides an overview of financial statement analysis for a company called Basket Wonders. It includes sample financial statements for Basket Wonders including a balance sheet and income statement. It then discusses various types of ratio analysis that can be used to analyze the financial statements including liquidity ratios, leverage ratios, coverage ratios, and activity/turnover ratios. It calculates these ratios for Basket Wonders and compares them to industry averages to identify areas of strength or weakness for the company. Key findings include potential issues with Basket Wonders' inventory levels and lower than average profitability.
accounting process
The document provides an overview of the accounting process. It defines accounting and discusses its key principles and concepts. It describes the different branches and types of accounting. It then explains the accounting process which involves identifying transactions, preparing documents, recording transactions in a journal, posting to ledgers, preparing trial balances and final accounts such as profit and loss statements and balance sheets. It also discusses the different books of accounts used such as journals, ledgers and trial balances. Finally, it covers accounting systems and basics such as debits and credits, types of accounts and how to prepare and balance accounts.
Basic accounting principles
The document discusses key accounting principles including the four main financial statements, the basic accounting equation, and different types of accounts. It also covers topics like accrual versus cash accounting, depreciation, financial analysis methods, and financial ratios used to evaluate business performance and health. The document is intended to provide an overview of basic accounting concepts.
Types of Ratio analyis and their significance
Ratio analysis is used to analyze financial statements and determine key metrics and relationships between items. It can help management with forecasting, planning, control, and decision making. There are various types of ratios that provide different insights. Liquidity ratios like current and quick ratios measure a company's ability to meet short-term obligations. Leverage or capital structure ratios like debt-to-equity examine how the company is financing its assets and level of financial risk. Activity/turnover ratios review how efficiently a company uses its assets. Profitability ratios assess return on sales, assets, and equity. Ratio analysis provides both opportunities to understand a business better but also has some limitations to consider.
Shiltscpa accounting 101 presentation
The document provides an overview of accounting concepts and financial statements for attorneys. It covers topics such as financial statements and tax returns, financial analysis, advisory functions, and client risks and opportunities that can be identified from statements and returns. The document defines accounting and discusses the accounting equation, balance sheet, income statement, statement of cash flows, and components of personal and business tax returns. It emphasizes how statements and returns can provide both obvious and not-so-obvious insights about clients' financial health, risks, opportunities, and more.
Funds flow statement
The document discusses funds flow statements and their preparation. It provides definitions of key terms like working capital and flow of funds. It explains that a funds flow statement depicts changes in working capital between two balance sheet dates by analyzing changes in current assets and current liabilities. The summary also shows how to prepare schedules of changes in working capital and sources and uses of funds statements to analyze the flow of funds.
Accounting concepts
Accounting concept refers to the
Basic assumptions
Rules
Principles
which work as the basis of recording of business transactions and preparing accounts.
Difference between cost accounting ,financial accounting and
The document compares and contrasts financial accounting, cost accounting, and management accounting. Financial accounting provides information to external parties and focuses on reporting profits and financial position. Cost accounting provides information to management for planning, operations, control, and decision making. It breaks costs down on a unit basis. Management accounting helps managers make effective decisions and uses both historical and predictive information. It has a broader scope than cost accounting.
Ratio Analysis - Meaning and Types
Ratio analysis is a quantitative method used to assess the liquidity, performance, solvency and profitability of a company by analyzing financial statement values as percentages rather than line items. It simplifies financial statements, allows comparison between companies of different sizes, and highlights key data. However, comparisons between companies in different industries may be ambiguous, accounting practices can vary, and it focuses on past data rather than future performance.
Ratio analysis
The document discusses ratio analysis and various types of financial ratios used to analyze the financial performance and position of a company. It defines key liquidity ratios like current ratio and quick ratio. It also explains leverage ratios such as debt-equity ratio and total debt ratio that measure the use of debt financing. Further, it covers activity ratios including inventory turnover ratio and debtors' turnover ratio that assess efficiency of inventory and receivables management. The document emphasizes the importance of ratio analysis and interpretation of ratios with industry benchmarks.
Account
The document defines accounting as recording, classifying, and summarizing financial transactions and events to prepare financial statements. It discusses the basic accounting concepts like the accounting equation, assets, liabilities, equity, revenues and expenses. It also explains the key steps in accounting cycle which includes recording transactions, posting to ledger accounts, preparing an unadjusted trial balance, making adjusting entries, preparing an adjusted trial balance and financial statements, and closing temporary accounts. The accounting cycle aims to generate useful financial information for decision making in the form of income statement, balance sheet, and other financial reports.
Accounts and its functions
Accounting records, classifies, and summarizes business transactions to provide financial information to both internal and external users. It aims to determine profits and financial position, facilitate management control, and assess tax liability. However, accounting has limitations as it uses monetary values and estimates, and may be manipulated. The main accounting systems are cash basis, accrual basis, and mixed basis. Stakeholders like shareholders, creditors, management, employees, and the government rely on accounting information for decision making.
Introduction to accounting
This document provides an introduction to the concepts of accounting. It defines accounting as a system that collects and processes financial information to allow informed decisions by users. It discusses the need for accounting to determine results of business transactions and the financial position. It outlines the key functions of accounting like identifying, recording, classifying, summarizing, analyzing, interpreting and communicating financial information. It also discusses the accounting cycle and different branches and users of accounting information. Finally, it provides definitions of some basic accounting terms.
FINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT, ROLE OF FINANCIAL MANAGEMENT, IMPORTANCE OF FINANCIAL MANAGEMENT, FEATURES OF FINANCIAL MANAGEMENT, SCOPE OF FINANCIAL MANAGEMENT, FUTURE OF FINANCIAL MANAGEMENT, etc.
Financial statement analysis
This document provides an introduction to financial statement analysis. It discusses the key types of financial statements, including the income statement, balance sheet, statement of changes in owner's equity, and statement of changes in financial position. It also outlines different classifications and techniques for analyzing financial statements, such as external vs internal analysis, horizontal vs vertical analysis, comparative statement analysis, trend analysis, common size analysis, funds flow analysis, cash flow analysis, and ratio analysis. The overall purpose is to introduce the reader to how financial statements are constructed and various methods for evaluating the financial and operational performance of a business based on its financial reporting.
INVESTMENT DECISION
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This document discusses financial statement analysis. It defines financial statement analysis as determining a firm's financial strengths and weaknesses by analyzing relationships between balance sheet, income statement, and other data. Analysis involves simplifying financial data through classification and interpretation to explain meaning. Financial statement analysis is useful for managers, investors, lenders, and others to evaluate performance, liquidity, solvency, profitability, and future prospects. Common tools for analysis include comparative statements, common size statements, trend analysis, ratio analysis, and cash flow analysis.
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This document discusses techniques for analyzing financial statements, including:
1. Comparative statements analysis examines changes in financial statement items over time or between companies using absolute and percentage changes.
2. Common size statements analysis expresses each financial statement item as a percentage of a common item to show relationships.
3. Trend analysis compares financial statements over several years to analyze a company's past performance and future trends.
4. Ratio analysis describes significant relationships between balance sheet and income statement items.
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The document provides information about financial statement analysis. It defines financial statement analysis as the process of evaluating relationships between parts of financial statements to understand a firm's position and performance. It discusses the different types of financial statements and the various users of financial statements, including management, creditors, investors, and government. It also outlines different types of financial analysis, including ratio analysis and comparative statement analysis. Ratio analysis is described as a key tool that establishes relationships between financial metrics to evaluate a firm's liquidity, leverage, activity, and profitability.
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1. Financial statements are prepared primarily for decision making and play a dominant role in setting the framework for management decisions. They provide information on a company's financial position, performance, and cash flows.
2. Financial statement analysis is the process of evaluating relationships between different components of financial statements to better understand a firm's financial position and performance. It helps identify trends and relationships to evaluate profitability, liquidity, and solvency.
3. Key methods of financial statement analysis include comparative analysis, common size analysis, ratio analysis, and trend analysis, which allow comparison of financial results to historical data and industry benchmarks.
Analysis of Financial Statement
Abstract: A financial statement is the lifeblood of any business. People rely on these financial statements to know the condition, performance and ability to efficiently sustain past and future operations of a particular business. The above topic throws light on credentials of financial statement analysis in both theoretical and pragmatic ways. Through this I want to highlight the ways, methods and techniques to analyse the financial statements to determine the position of business, its profitability, future earnings, ability to pay interest, etc. in more detailed manner, which is helpful to extrapolate and forecast the future of a business concern.
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Financial statement analysis is the process of reviewing and analyzing a company's financial statements to make better economic decisions to earn income in the future. These statements include the income statement, balance sheet, statement of cash flows, notes to accounts, and a statement of changes in equity.
The financial analysis examines and interprets data of various types according to their suitability. The most common types of financial analysis are vertical analysis, horizontal analysis, leverage analysis, growth rates, profitability analysis, liquidity analysis, efficiency analysis, cash flow, rates of return, valuation analysis, scenario and sensitivity analysis, and variance analysis.
Financial statement analysis
The document summarizes financial statement analysis. It discusses the objectives of financial statements which are to provide information for economic decisions, about financial position, performance, and changes in financial position. It then defines financial statement analysis as studying relationships among factors disclosed in statements. Analysis allows evaluation of a firm's position and performance. Objectives of analysis include judging financial health, profitability, debt capacity, and solvency. Types of analysis include external, internal, horizontal, and vertical. Methods include common size statements, comparative statements, trend ratios, and ratio, funds flow, cash flow, break-even, and value added analysis.
Financial analysis
Financial statement analysis involves calculating ratios to evaluate a company's liquidity, profitability, operational efficiency and growth potential. Key financial statements include the income statement, balance sheet, and cash flow statement. The income statement shows revenue, expenses and profits over time. The balance sheet outlines assets, liabilities and owner's equity at a point in time. Ratio analysis involves calculating ratios from the financial statements to analyze a company's activity, liquidity, solvency and profitability by comparing figures to industry averages and prior periods. Activity ratios measure asset usage efficiency, liquidity ratios assess short-term debt paying ability, and profitability ratios evaluate net income generation.
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The document provides an overview of financial statement analysis. It discusses various types of financial analysis including comparative analysis, common size statements, trend analysis, and ratio analysis. It outlines the objectives and users of financial statement analysis. Some key ratios discussed include current ratio, quick ratio, debt-equity ratio, debtors turnover ratio, and creditors turnover ratio. Methods of analyzing and interpreting financial statements are also presented.
the-concept-of-financial-analysis-in-detail.pdf
Financial analysis involves assessing business entities, projects, budgets, and forecasts from a financial perspective by analyzing financial statements. It helps with decision making related to investing and financing. External analysis is conducted by outsiders to determine liquidity and ability to generate funds, while internal analysis is done by management to ensure business functions align with goals. The objectives of financial analysis are to determine profitability, financial position, operational efficiency, and future risks and opportunities. Common types of analysis include vertical analysis, horizontal analysis, growth rates analysis, profitability analysis, and liquidity analysis. Financial analysis provides useful insights but has limitations as it relies on historical data and does not consider intangible assets.
the-concept-of-financial-analysis-in-detail.pdf
Financial analysis involves assessing business entities, projects, budgets, and forecasts from a financial perspective by analyzing financial statements. It helps with decision making related to investing and financing. External analysis is conducted by outsiders to determine liquidity and ability to generate funds, while internal analysis is done by management to ensure business functions align with goals. The objectives of financial analysis are to determine profitability, financial position, operational efficiency, and future risks and opportunities. Common types of analysis include vertical analysis, horizontal analysis, growth rates analysis, profitability analysis, and liquidity analysis. Financial analysis provides useful insights but has limitations as it relies on historical data and financial statements may contain errors.
RGShelar-Methods of Financial Analysis.pptx
This document discusses methods of financial analysis. It begins by introducing financial analysis and its goals of assessing a company's financial performance, profitability, solvency, and other metrics. It then discusses the various techniques used in financial analysis including ratio analysis, trend analysis, and cash flow analysis. The document outlines the needs and objectives of financial analysis, as well as its various users both internal and external to a company. It categorizes the different types of financial analysis based on the materials used, modes of operation, entities involved, and time horizon. The document concludes by noting some limitations of financial analysis.
Horizontal and Vertical Analysis | Accounting
Horizontal analysis is also known as Trend Analysis refers to studying the behavior of individual financial statement items over several accounting periods. The Vertical Analysis concentrates on the relationships between various financial items on a financial statement. Copy the link given below and paste it in new browser window to get more information on Horizontal and Vertical Analysis:- http://www.transtutors.com/homework-help/accounting/horizontal-and-vertical-analysis.aspx
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- 3. FINANCIAL ANALYSIS Financial Analysis is defined as being the process of identifying financial strength and weakness of a business by establishing relationship between the elements of balance sheet and income statement. The information pertaining to the financial statements is of great importance through which interpretation and analysis is made.
- 4. TECHNIQUES OF FINANCIAL ANALYSIS • External analysis: The external analysis is done on the basis of published financial statements by those who do not have access to the accounting information, such as, stock holders, banks, creditors, and the general public.
- 5. Internal Analysis This type of analysis is done by finance and accounting department. The objective of such analysis is to provide the information to the top management, while assisting in the decision making process.
- 6. • It is concerned with the working capital analysis. It involves the analysis of both current assets and current liabilities, so that the cash position (liquidity) may be determined. SHORT TERM ANALYSIS
- 7. Horizontal AnalysisThe comparative financial statements are an example of horizontal analysis, as it involves analysis of financial statements for a number of years. Horizontal analysis is also regarded as Dynamic Analysis.
- 8. Vertical Analysis it is performed when financial ratios are to be calculated for one year only. It is also called as static analysis. An assortment of techniques is employed in analysing financial statements. They are: Comparative Financial Statements, statement of changes in working capital, common size balance sheets and income statements, trend analysis and ratio analysis.
- 9. Comparative Financial Statements It is an important method of analysis which is used to make comparison between two financial statements. Being a technique of horizontal analysis and applicable to both financial statements, income statement and balance sheet, it provides meaningful information when compared to the similar data of prior periods.
- 10. Trend Analysis • It is an important tool of horizontal analysis. • Under this analysis, ratios of different items of the financial statements for various periods are calculated and the comparison is made accordingly. • The analysis over the prior years indicates the trend or direction.
- 11. Ratio Analysis The most popular way to analyse the financial statements is computing ratios. It is an important and widely used tool of analysis of financial statements. While developing a meaningful relationship between the individual items or group of items of balance sheets and income statements, it highlights the key performance indicators, such as, liquidity, solvency and profitability of a business entity.