This document provides an introduction to financial management and analysis for farms. It discusses the importance of the balance sheet and profit and loss statement for evaluating a farm's performance, risk, and financial health over time. Key ratios for financial analysis are explained, including debt, working capital, and gross margin ratios. The goals are to understand a farm's profitability, solvency, and liquidity based on these financial statements and metrics.
This document contains balance sheet information for Hindustan Unilever Limited (HUL). HUL is a British-Dutch multinational consumer goods company headquartered in Mumbai, India with over 35 popular brands used by 2 billion people daily. The balance sheets show HUL's standalone financial position and consolidated position including its subsidiaries. Key figures include total shareholders' funds of Rs. 7,659 crores standalone and Rs. 7,885 crores consolidated. Total assets are Rs. 17,865 crores standalone and Rs. 18,629 crores consolidated.
The document discusses the analysis of balance sheets and profit and loss statements. It defines various line items that appear on both, such as sources of funds, uses of funds, capital, reserves, liabilities, assets, revenue, expenses, and profits. Key aspects covered include classification of current and non-current items, treatment of investments, provisions, and the valuation of inventory.
The document discusses balance sheet analysis. It defines a balance sheet as a financial statement that presents the assets and liabilities of a company or individual. There are three main methods of balance sheet analysis: vertical analysis, which analyzes a single period statement; horizontal analysis, which compares data sets over two or more periods; and ratio analysis, which uses ratios to compare financial metrics to benchmarks. Common ratios examined in balance sheet analysis include liquidity, capital structure, profitability, and activity ratios.
This document provides an introduction to key financial statements used in agriculture: the balance sheet, income statement, and cash flow statement. It describes the components and purpose of each statement. The balance sheet presents the financial position of a farm at a point in time, including assets, liabilities, and owner equity. The income statement measures revenue and expenses over a period of time, usually a year. The cash flow statement tracks cash inflows and outflows over time. Financial ratios are also discussed that can evaluate the liquidity, solvency, profitability, and efficiency of a farm business.
This document discusses the statement of cash flows and financial analysis. It provides examples of constructing a statement of cash flows for an individual and a business. It explains the three sections of the statement of cash flows - operating, investing, and financing activities. It also discusses various types of ratios used in financial analysis, including liquidity, asset management, debt management, and profitability ratios.
The document discusses the key components of a balance sheet, including assets, liabilities, and equity. It explains that assets are what a business owns, liabilities are what it owes, and the balance sheet must balance with total assets equaling the sum of total liabilities and equity. It also provides examples of current assets like cash, accounts receivable, and inventory, as well as fixed/long-term assets, current and long-term liabilities, and components of equity like common stock and retained earnings. Interpretation of a balance sheet can provide insight into a company's financial position.
Vertical common size balance sheets are presented for HDFC Mutual Fund for the financial years 2011 and 2012. Key points include:
1) Share capital increased slightly while reserves decreased from 2011 to 2012.
2) Investments decreased as a percentage of total funds from 97% to 95.15% over the period.
3) Current assets increased from 3.99% to 5.50% of total funds while current liabilities also increased slightly.
The vertical common size balance sheets allow comparison of line items as a percentage of total funds employed for the two periods.
The document provides an overview of financial statements, including balance sheets, cash flow statements, and notes. It explains that a balance sheet summarizes a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. It also describes the major components of each type of financial statement and provides sample notes to the financial statements that give additional context and details. The cash flow statement tracks cash inflows and outflows from operating, investing, and financing activities over a period of time. Understanding these statements is important for assessing a company's financial strength and cash flows.
This document contains balance sheet information for Hindustan Unilever Limited (HUL). HUL is a British-Dutch multinational consumer goods company headquartered in Mumbai, India with over 35 popular brands used by 2 billion people daily. The balance sheets show HUL's standalone financial position and consolidated position including its subsidiaries. Key figures include total shareholders' funds of Rs. 7,659 crores standalone and Rs. 7,885 crores consolidated. Total assets are Rs. 17,865 crores standalone and Rs. 18,629 crores consolidated.
The document discusses the analysis of balance sheets and profit and loss statements. It defines various line items that appear on both, such as sources of funds, uses of funds, capital, reserves, liabilities, assets, revenue, expenses, and profits. Key aspects covered include classification of current and non-current items, treatment of investments, provisions, and the valuation of inventory.
The document discusses balance sheet analysis. It defines a balance sheet as a financial statement that presents the assets and liabilities of a company or individual. There are three main methods of balance sheet analysis: vertical analysis, which analyzes a single period statement; horizontal analysis, which compares data sets over two or more periods; and ratio analysis, which uses ratios to compare financial metrics to benchmarks. Common ratios examined in balance sheet analysis include liquidity, capital structure, profitability, and activity ratios.
This document provides an introduction to key financial statements used in agriculture: the balance sheet, income statement, and cash flow statement. It describes the components and purpose of each statement. The balance sheet presents the financial position of a farm at a point in time, including assets, liabilities, and owner equity. The income statement measures revenue and expenses over a period of time, usually a year. The cash flow statement tracks cash inflows and outflows over time. Financial ratios are also discussed that can evaluate the liquidity, solvency, profitability, and efficiency of a farm business.
This document discusses the statement of cash flows and financial analysis. It provides examples of constructing a statement of cash flows for an individual and a business. It explains the three sections of the statement of cash flows - operating, investing, and financing activities. It also discusses various types of ratios used in financial analysis, including liquidity, asset management, debt management, and profitability ratios.
The document discusses the key components of a balance sheet, including assets, liabilities, and equity. It explains that assets are what a business owns, liabilities are what it owes, and the balance sheet must balance with total assets equaling the sum of total liabilities and equity. It also provides examples of current assets like cash, accounts receivable, and inventory, as well as fixed/long-term assets, current and long-term liabilities, and components of equity like common stock and retained earnings. Interpretation of a balance sheet can provide insight into a company's financial position.
Vertical common size balance sheets are presented for HDFC Mutual Fund for the financial years 2011 and 2012. Key points include:
1) Share capital increased slightly while reserves decreased from 2011 to 2012.
2) Investments decreased as a percentage of total funds from 97% to 95.15% over the period.
3) Current assets increased from 3.99% to 5.50% of total funds while current liabilities also increased slightly.
The vertical common size balance sheets allow comparison of line items as a percentage of total funds employed for the two periods.
The document provides an overview of financial statements, including balance sheets, cash flow statements, and notes. It explains that a balance sheet summarizes a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. It also describes the major components of each type of financial statement and provides sample notes to the financial statements that give additional context and details. The cash flow statement tracks cash inflows and outflows from operating, investing, and financing activities over a period of time. Understanding these statements is important for assessing a company's financial strength and cash flows.
This document discusses various topics related to financial management, including:
- Forms of business organization such as sole proprietorships, partnerships, and companies
- Financial statements such as balance sheets, income statements, and cash flow statements
- Accounting concepts and conventions used in preparing financial statements
- Types of financial statement analysis used by external users to evaluate companies
The document discusses the closing process in accounting, which prepares accounts for the next period and resets temporary accounts to zero. It involves 4 steps: 1) closing revenue accounts to an income summary account, 2) closing expense accounts to the income summary account, 3) closing the income summary account to the owner's capital account, and 4) closing the withdrawals account to the owner's capital account. This results in a post-closing trial balance with zero temporary account balances and balances in permanent accounts ready for the next financial statements.
Balance sheet reconciliations are an important part of the closing process that helps identify errors by comparing account balances between the general ledger and other sources like sub-ledgers, bank statements, or physical counts. Key accounts that need reconciling include cash, accounts receivable, inventory, prepaid expenses, accounts payable, and accrued liabilities. The reconciliation process involves labeling any differences found as reconciling items and ensuring the total balances from both sources are equal. Performing regular balance sheet reconciliations helps ensure accounting records are accurate and can detect issues like missing or untimely transactions.
The document discusses balance sheets and their components. It begins by explaining that a balance sheet provides a snapshot of everything a company owns (assets) and owes (liabilities and equity), where assets must equal liabilities plus equity. It then discusses the key components of a balance sheet - current and non-current assets, like cash, inventory, and property/equipment; current and non-current liabilities, like accounts payable and debt; and equity, including retained earnings. It also covers how companies allocate capital between investing in their business, acquisitions, debt repayment, and returning value to shareholders. Effective capital allocation is positioned as the CEO's most important job.
Financial statement analysis is the process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making. Financial statements record financial data; however, this information must be evaluated through financial statement analysis to become more useful to investors, shareholders, managers and other interested parties.
The document discusses financial statements for internal and external purposes. It explains that internal financial statements are prepared for management and employees who are familiar with the business. They show expenses by natural category and provide limited additional notes. External financial statements are prepared under regulations like the Companies Act and have more disclosure requirements to be useful to outsiders like shareholders and creditors. The document then outlines the requirements for accounting records, components of financial statements, recognition and measurement principles, and disclosure standards in external financial statements under IFRS.
This document discusses the analysis of financial statements through various tools and techniques. It begins by defining financial statement analysis and outlining its purpose. It then explains key tools for analysis like comparative statements, common size statements, trend analysis, and ratio analysis. Various types of ratios are classified like liquidity, leverage, activity, and profitability ratios. The document also discusses the interpretation of analysis and interested parties that use financial statement analysis.
This document provides an overview of financial statement analysis, including definitions of key accounting concepts and types of financial statements. It discusses the balance sheet, income statement, and statement of cash flows. It also covers ratio analysis and types of ratios used in analysis, including liquidity, leverage, activity, and profitability ratios. The document aims to provide a practical approach to understanding and analyzing financial statements.
The document discusses income statements and balance sheets. It defines an income statement as presenting a company's revenues, expenses and profits over a period of time, focusing on revenues and costs associated with revenues. It defines a balance sheet as summarizing a company's assets, liabilities, and shareholders' equity at a point in time, showing the relationship that assets equal liabilities plus owners' equity. It provides examples of components and formats for both financial statements.
The document outlines key aspects of a course on financial statement analysis, including:
- The course will cover the nature, purpose, and methods of financial statement analysis as well as ratio analysis and its importance.
- Students will learn about the objectives, users, and limitations of financial statement analysis to better evaluate the financial position and performance of companies.
- The course will help students understand various liquidity, profitability, and debt ratios and be able to classify accounting ratios to assess companies' financial health for decision making.
Understanding financial statements ppt @ mba financeBabasab Patil
The document discusses accounting and financial statements. It explains that accounting provides financial information to various internal and external stakeholders of a business. It also discusses the key financial statements - the income statement, balance sheet, and cash flow statement. The income statement shows the profit generated over a period. The balance sheet shows the assets, liabilities, and sources of funds as of a certain date. The cash flow statement shows the sources and uses of cash over a period. The document provides details on revenue recognition, inventory valuation, depreciation, and other accounting concepts.
This document provides an overview and learning objectives for Chapter 1 of a study guide on financial statements. It discusses key concepts such as the role of accounting, the elements of financial statements including assets, liabilities, equity, revenues and expenses, and the accounting equation. It also covers classifying business transactions, preparing financial statements, recording transactions using a horizontal model, and the importance of ethics for accountants. Finally, it identifies three types of business organizations as service, merchandising, or manufacturing.
Here are the solutions to the selected problems from Chapter 17:
P17-7A:
Accounts receivable, December 31, 2009 $90,000
Estimated uncollectible accounts (3% of receivables) 2,700
Net accounts receivable $87,300
Accounts receivable, December 31, 2010 $110,000
Estimated uncollectible accounts (5% of receivables) 5,500
Net accounts receivable $104,500
Increase in net accounts receivable $17,200
P17-9A:
Accounts receivable, January 1 $80,000
Credit sales for January 150,000
Collections for January (120,000)
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.
The document discusses the purpose and analysis of a balance sheet. It explains the key components of a balance sheet including assets, liabilities, and owner's equity. It provides an example balance sheet for a farmer and analyzes the farmer's financial ratios to assess liquidity and solvency. Key metrics included the current ratio, debt-to-asset ratio, and working capital.
The document discusses various responsibilities of financial managers including managing working capital, estimating seasonal needs, long-term financial planning, determining appropriate financing and investment mixes, and determining dividend amounts. It also discusses the interrelationships between financing, investment, and dividend decisions and how changes in one area can impact the others. Various methods of financial statement analysis are described including horizontal analysis, vertical analysis, common-size statements, trend percentages, and ratio analysis. Examples of horizontal analysis are provided comparing the balance sheet and income statement of a company between two years.
The document discusses financial statement analysis and financial models. It provides an overview of financial statement analysis, including that it involves selecting, evaluating, and interpreting financial data to assess a company's financial condition and performance. It also discusses the objectives of financial statement analysis, the different types of financial statements (income statement, balance sheet, cash flow statement), and methods of analyzing financial statements, including ratio analysis, horizontal analysis, vertical analysis and common-size statements. The document is intended to provide information on financial statement analysis for investors and other stakeholders.
This document provides an overview of analyzing company finances through interpreting financial statements and calculating key ratios. It discusses developing financial fluency by scanning statements for large numbers, variances, and inconsistencies then focusing on profitability, liquidity, and gearing ratios. Key ratios covered include gross profit, net profit, return on capital employed, current ratio, debt-to-equity, dividend yield, and earnings per share. The document also summarizes budgeting as a short-term business plan and different budgeting approaches like top-down, bottom-up, incremental, and zero-based budgeting.
Financial statement analysis involves analyzing financial documents like income statements, balance sheets, and cash flow statements to evaluate a business's performance and financial position over time and in comparison to industry averages. It provides information on profitability, liquidity, asset management, financial structure, and market value. For Walker Ltd, an investor is considering shares, so the summary evaluates the company's performance, position, and recommends purchasing shares based on acceptable ratios, strong industry prospects, sales growth, cash flows, and favorable return on equity compared to industry averages.
This document provides training materials on financial reporting for agricultural cooperatives. It includes 7 activities covering key topics:
1. The balance sheet, which summarizes a company's assets, liabilities, and equity at a point in time.
2. The income statement, which presents revenues, expenses, and profits over a period of time.
3. The equity statement, which reconciles the beginning and ending owner equity amounts.
4. The cash flow statement, which shows cash inflows and outflows from operating, investing, and financing activities.
5. Management discussion and analysis (MD&A), which internal users use for planning and external users use for performance evaluation.
6.
This document provides an overview of key concepts in financial accounting and analysis. It begins with definitions and principles of financial accounting. It then explains key financial statements - the income statement, balance sheet, and cash flow statement - and what types of financial information each provides. The document also covers ratio analysis and defines categories of ratios that can be used to analyze a company's performance, including activity ratios, liquidity ratios, solvency ratios, and profitability ratios. It provides examples of specific ratios within each category.
This document discusses various topics related to financial management, including:
- Forms of business organization such as sole proprietorships, partnerships, and companies
- Financial statements such as balance sheets, income statements, and cash flow statements
- Accounting concepts and conventions used in preparing financial statements
- Types of financial statement analysis used by external users to evaluate companies
The document discusses the closing process in accounting, which prepares accounts for the next period and resets temporary accounts to zero. It involves 4 steps: 1) closing revenue accounts to an income summary account, 2) closing expense accounts to the income summary account, 3) closing the income summary account to the owner's capital account, and 4) closing the withdrawals account to the owner's capital account. This results in a post-closing trial balance with zero temporary account balances and balances in permanent accounts ready for the next financial statements.
Balance sheet reconciliations are an important part of the closing process that helps identify errors by comparing account balances between the general ledger and other sources like sub-ledgers, bank statements, or physical counts. Key accounts that need reconciling include cash, accounts receivable, inventory, prepaid expenses, accounts payable, and accrued liabilities. The reconciliation process involves labeling any differences found as reconciling items and ensuring the total balances from both sources are equal. Performing regular balance sheet reconciliations helps ensure accounting records are accurate and can detect issues like missing or untimely transactions.
The document discusses balance sheets and their components. It begins by explaining that a balance sheet provides a snapshot of everything a company owns (assets) and owes (liabilities and equity), where assets must equal liabilities plus equity. It then discusses the key components of a balance sheet - current and non-current assets, like cash, inventory, and property/equipment; current and non-current liabilities, like accounts payable and debt; and equity, including retained earnings. It also covers how companies allocate capital between investing in their business, acquisitions, debt repayment, and returning value to shareholders. Effective capital allocation is positioned as the CEO's most important job.
Financial statement analysis is the process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making. Financial statements record financial data; however, this information must be evaluated through financial statement analysis to become more useful to investors, shareholders, managers and other interested parties.
The document discusses financial statements for internal and external purposes. It explains that internal financial statements are prepared for management and employees who are familiar with the business. They show expenses by natural category and provide limited additional notes. External financial statements are prepared under regulations like the Companies Act and have more disclosure requirements to be useful to outsiders like shareholders and creditors. The document then outlines the requirements for accounting records, components of financial statements, recognition and measurement principles, and disclosure standards in external financial statements under IFRS.
This document discusses the analysis of financial statements through various tools and techniques. It begins by defining financial statement analysis and outlining its purpose. It then explains key tools for analysis like comparative statements, common size statements, trend analysis, and ratio analysis. Various types of ratios are classified like liquidity, leverage, activity, and profitability ratios. The document also discusses the interpretation of analysis and interested parties that use financial statement analysis.
This document provides an overview of financial statement analysis, including definitions of key accounting concepts and types of financial statements. It discusses the balance sheet, income statement, and statement of cash flows. It also covers ratio analysis and types of ratios used in analysis, including liquidity, leverage, activity, and profitability ratios. The document aims to provide a practical approach to understanding and analyzing financial statements.
The document discusses income statements and balance sheets. It defines an income statement as presenting a company's revenues, expenses and profits over a period of time, focusing on revenues and costs associated with revenues. It defines a balance sheet as summarizing a company's assets, liabilities, and shareholders' equity at a point in time, showing the relationship that assets equal liabilities plus owners' equity. It provides examples of components and formats for both financial statements.
The document outlines key aspects of a course on financial statement analysis, including:
- The course will cover the nature, purpose, and methods of financial statement analysis as well as ratio analysis and its importance.
- Students will learn about the objectives, users, and limitations of financial statement analysis to better evaluate the financial position and performance of companies.
- The course will help students understand various liquidity, profitability, and debt ratios and be able to classify accounting ratios to assess companies' financial health for decision making.
Understanding financial statements ppt @ mba financeBabasab Patil
The document discusses accounting and financial statements. It explains that accounting provides financial information to various internal and external stakeholders of a business. It also discusses the key financial statements - the income statement, balance sheet, and cash flow statement. The income statement shows the profit generated over a period. The balance sheet shows the assets, liabilities, and sources of funds as of a certain date. The cash flow statement shows the sources and uses of cash over a period. The document provides details on revenue recognition, inventory valuation, depreciation, and other accounting concepts.
This document provides an overview and learning objectives for Chapter 1 of a study guide on financial statements. It discusses key concepts such as the role of accounting, the elements of financial statements including assets, liabilities, equity, revenues and expenses, and the accounting equation. It also covers classifying business transactions, preparing financial statements, recording transactions using a horizontal model, and the importance of ethics for accountants. Finally, it identifies three types of business organizations as service, merchandising, or manufacturing.
Here are the solutions to the selected problems from Chapter 17:
P17-7A:
Accounts receivable, December 31, 2009 $90,000
Estimated uncollectible accounts (3% of receivables) 2,700
Net accounts receivable $87,300
Accounts receivable, December 31, 2010 $110,000
Estimated uncollectible accounts (5% of receivables) 5,500
Net accounts receivable $104,500
Increase in net accounts receivable $17,200
P17-9A:
Accounts receivable, January 1 $80,000
Credit sales for January 150,000
Collections for January (120,000)
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.
The document discusses the purpose and analysis of a balance sheet. It explains the key components of a balance sheet including assets, liabilities, and owner's equity. It provides an example balance sheet for a farmer and analyzes the farmer's financial ratios to assess liquidity and solvency. Key metrics included the current ratio, debt-to-asset ratio, and working capital.
The document discusses various responsibilities of financial managers including managing working capital, estimating seasonal needs, long-term financial planning, determining appropriate financing and investment mixes, and determining dividend amounts. It also discusses the interrelationships between financing, investment, and dividend decisions and how changes in one area can impact the others. Various methods of financial statement analysis are described including horizontal analysis, vertical analysis, common-size statements, trend percentages, and ratio analysis. Examples of horizontal analysis are provided comparing the balance sheet and income statement of a company between two years.
The document discusses financial statement analysis and financial models. It provides an overview of financial statement analysis, including that it involves selecting, evaluating, and interpreting financial data to assess a company's financial condition and performance. It also discusses the objectives of financial statement analysis, the different types of financial statements (income statement, balance sheet, cash flow statement), and methods of analyzing financial statements, including ratio analysis, horizontal analysis, vertical analysis and common-size statements. The document is intended to provide information on financial statement analysis for investors and other stakeholders.
This document provides an overview of analyzing company finances through interpreting financial statements and calculating key ratios. It discusses developing financial fluency by scanning statements for large numbers, variances, and inconsistencies then focusing on profitability, liquidity, and gearing ratios. Key ratios covered include gross profit, net profit, return on capital employed, current ratio, debt-to-equity, dividend yield, and earnings per share. The document also summarizes budgeting as a short-term business plan and different budgeting approaches like top-down, bottom-up, incremental, and zero-based budgeting.
Financial statement analysis involves analyzing financial documents like income statements, balance sheets, and cash flow statements to evaluate a business's performance and financial position over time and in comparison to industry averages. It provides information on profitability, liquidity, asset management, financial structure, and market value. For Walker Ltd, an investor is considering shares, so the summary evaluates the company's performance, position, and recommends purchasing shares based on acceptable ratios, strong industry prospects, sales growth, cash flows, and favorable return on equity compared to industry averages.
This document provides training materials on financial reporting for agricultural cooperatives. It includes 7 activities covering key topics:
1. The balance sheet, which summarizes a company's assets, liabilities, and equity at a point in time.
2. The income statement, which presents revenues, expenses, and profits over a period of time.
3. The equity statement, which reconciles the beginning and ending owner equity amounts.
4. The cash flow statement, which shows cash inflows and outflows from operating, investing, and financing activities.
5. Management discussion and analysis (MD&A), which internal users use for planning and external users use for performance evaluation.
6.
This document provides an overview of key concepts in financial accounting and analysis. It begins with definitions and principles of financial accounting. It then explains key financial statements - the income statement, balance sheet, and cash flow statement - and what types of financial information each provides. The document also covers ratio analysis and defines categories of ratios that can be used to analyze a company's performance, including activity ratios, liquidity ratios, solvency ratios, and profitability ratios. It provides examples of specific ratios within each category.
This document discusses key financial statements and ratios used to evaluate company performance. It describes the three main financial statements - the balance sheet, income statement, and cash flow statement. The balance sheet provides a snapshot of company assets, liabilities, and equity on a given date. The income statement shows revenues and expenses over a period of time. The cash flow statement reports cash inflows and outflows. Financial ratios are calculated using numbers from the statements to analyze a company's financial health, like the current ratio from the balance sheet and net profit ratio from the income statement.
The document provides an overview of how to prepare three basic financial statements: the statement of comprehensive income, statement of retained earnings, and statement of financial position. It explains the purpose and format of each statement. The statement of comprehensive income summarizes revenues and expenses for a period. The statement of retained earnings shows changes in retained earnings over time. The statement of financial position lists assets, liabilities, and equity on a given date. An example is provided to demonstrate preparing the three statements.
Chapter 6_Interpretation of Financial StatementPresana1
This document provides an overview of ratio analysis for financial statement evaluation. It defines ratios that measure profitability, liquidity, management efficiency, leverage, and valuation/growth. Specific ratios are defined along with their formulas and uses. An example is provided to demonstrate ratio calculations for the Norton Corporation using data on its income statement, balance sheet, and other financial details. Ratios computed include current ratio, acid-test ratio, accounts receivable turnover, inventory turnover, equity ratio, return on sales, return on equity, earnings per share, and price-earnings ratio. The document also outlines advantages and limitations of ratio analysis for stakeholders.
accounting important regarding the importance of accounting in accountsbalckstone358
Accounting is the process of recording and reporting financial transactions of a business. It involves keeping records of transactions, analyzing financial data, and ensuring compliance with regulations. Ratio analysis is a quantitative method used to evaluate a company's liquidity, profitability, and operational efficiency by analyzing its financial statements and key ratios in different categories such as liquidity, solvency, profitability, and turnover. Common ratios include the current ratio, debt-to-equity ratio, gross profit ratio, and inventory turnover ratio.
This document provides an overview of how to prepare three key financial statements: the income statement, balance sheet, and cash flow statement. It discusses the basic formats and components of each statement. The income statement reports a company's revenues, expenses and net income over a period of time. The balance sheet outlines a company's assets, liabilities and equity at a point in time. It categorizes assets as current and non-current and liabilities as current and long-term. The purpose is to analyze a company's financial position and performance.
This document provides an overview of how to read and understand key financial reports and metrics that are used to analyze the financial performance and condition of public companies. It discusses things like the balance sheet, income statement, cash flow statement, financial ratios, and investment strategies. The key elements covered include the components and purpose of the main financial reports, important accounting concepts and terms, and various ratios used to evaluate areas like liquidity, management performance, profitability, and stock valuation.
Financial Statement Analysis PresentationLean Teams
This document outlines an agenda for a seminar on understanding, analyzing, and using financial statements. The schedule includes breaks throughout a full day session from 9:00am to 4:00pm. The presenter will cover key concepts like the four main financial statements, accounting principles and assumptions, and how to interpret items like assets, liabilities, equity, revenues and expenses. Financial accounting will be distinguished from managerial accounting. Details like revenue recognition, depreciation, and the matching principle will be explained.
The document provides solutions to exercises for an accounting study guide. It includes solutions for exercises on defining accounting and its main functions, the difference between financial and management accounting, key financial statements (balance sheet, income statement, statement of cash flows), basic accounting principles, preparing balance sheets and income statements, double-entry accounting, recording transactions, and summarizing changes in financial position through journals and ledgers. Sample transactions are provided and journal entries are made to record the transactions.
The document discusses balance sheets, including how to prepare and analyze them. It provides definitions of key balance sheet elements like assets, liabilities, and equity. It also gives examples of current and fixed assets and current and long-term liabilities. The document includes an example balance sheet for a small tea farm and analyzes financial ratios like working capital, current ratio, and debt-to-equity ratio.
Financial Report and Ratio Analysis of Square Pharmaceuticals LimitedMD TOWFIQUR RAHMAN
This document analyzes the financial performance of Square Pharmaceuticals Ltd. for 2014-2015 using financial ratios. It provides Square's background and financial statements for the two years. The document then calculates and analyzes key ratios to evaluate Square's liquidity, activity, leverage, profitability, and growth. Specifically, it finds that in 2015 Square had a current ratio of 3.82 times, quick ratio of 2.52 times, inventory turnover of 4.51 times, and fixed asset turnover of 0.78 times. The analysis of ratios provides insight into Square's financial condition and efficiency over time.
This document provides a tutorial on preparing three basic financial statements: the income statement, statement of retained earnings, and balance sheet. It explains the purpose and format of each statement. The income statement reports revenues, expenses and net income for a period. The statement of retained earnings shows the changes in retained earnings from net income and dividends. The balance sheet reports assets, liabilities, and equity as of a point in time. The tutorial also discusses the accounts that make up each statement and the order they should be prepared.
The document provides a tutorial on preparing three key financial statements: the income statement, statement of retained earnings, and balance sheet. It explains the purpose and format of each statement. The income statement reports revenues, expenses and net income over a period of time. The statement of retained earnings shows the changes in retained earnings from the beginning to the end of the period. The balance sheet reports assets, liabilities, and equity of a company at a point in time.
This document provides a tutorial on preparing three basic financial statements: the income statement, statement of retained earnings, and balance sheet. It explains the purpose and format of each statement. The income statement reports revenues, expenses and net income for a period. The statement of retained earnings shows the changes in retained earnings from net income and dividends. The balance sheet reports assets, liabilities, and equity as of a point in time. The tutorial also discusses the accounts that make up each statement and the order they should be prepared.
This document outlines the key topics covered in a money and finance management course, including chapters on business accounting. Chapter 3 focuses on accounting and discusses the aim of accounting, which is to report financial information about a business's performance, financial position, and cash flow. It explains that accounting information is compiled into common financial statements like the income statement, balance sheet, statement of cash flows, and statement of retained earnings. The balance sheet section describes how a balance sheet categorizes a company's assets, liabilities, and shareholders' equity, with assets divided into current and fixed assets. It also provides a sample balance sheet formula showing that total assets must equal the sum of total liabilities and shareholders' equity.
After completing the course, students will be able to:
1. Explain key accounting concepts such as financial and managerial accounting, the accounting cycle, and preparing financial reports.
2. Distinguish accounting systems such as cash, accrual, single and double entry.
3. Apply accounting principles to prepare financial statements and analyze results.
Similar to Financial Deepening level - Basic Farm Management - LeadFarm Project (20)
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Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
Physiology and chemistry of skin and pigmentation, hairs, scalp, lips and nail, Cleansing cream, Lotions, Face powders, Face packs, Lipsticks, Bath products, soaps and baby product,
Preparation and standardization of the following : Tonic, Bleaches, Dentifrices and Mouth washes & Tooth Pastes, Cosmetics for Nails.
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
আমাদের সবার জন্য খুব খুব গুরুত্বপূর্ণ একটি বই ..বিসিএস, ব্যাংক, ইউনিভার্সিটি ভর্তি ও যে কোন প্রতিযোগিতা মূলক পরীক্ষার জন্য এর খুব ইম্পরট্যান্ট একটি বিষয় ...তাছাড়া বাংলাদেশের সাম্প্রতিক যে কোন ডাটা বা তথ্য এই বইতে পাবেন ...
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How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
The simplified electron and muon model, Oscillating Spacetime: The Foundation...RitikBhardwaj56
Discover the Simplified Electron and Muon Model: A New Wave-Based Approach to Understanding Particles delves into a groundbreaking theory that presents electrons and muons as rotating soliton waves within oscillating spacetime. Geared towards students, researchers, and science buffs, this book breaks down complex ideas into simple explanations. It covers topics such as electron waves, temporal dynamics, and the implications of this model on particle physics. With clear illustrations and easy-to-follow explanations, readers will gain a new outlook on the universe's fundamental nature.
A review of the growth of the Israel Genealogy Research Association Database Collection for the last 12 months. Our collection is now passed the 3 million mark and still growing. See which archives have contributed the most. See the different types of records we have, and which years have had records added. You can also see what we have for the future.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
हिंदी वर्णमाला पीपीटी, hindi alphabet PPT presentation, hindi varnamala PPT, Hindi Varnamala pdf, हिंदी स्वर, हिंदी व्यंजन, sikhiye hindi varnmala, dr. mulla adam ali, hindi language and literature, hindi alphabet with drawing, hindi alphabet pdf, hindi varnamala for childrens, hindi language, hindi varnamala practice for kids, https://www.drmullaadamali.com
This presentation includes basic of PCOS their pathology and treatment and also Ayurveda correlation of PCOS and Ayurvedic line of treatment mentioned in classics.
2. Project No: 2017-1-IE01-KA202-025711
This project has been funded with support from the European Commission.
This publication reflects the views only of the author, and the Commission
cannot be held responsible for any use which may be made of the
information contained therein.
2
3. What’s in this Module
• Aim and use of the Balance Sheet
• Aim and use of the Profit & Loss Statement
• The ratios of the financial analysis
• The financial diagnosis
3
4. Aim: To acquire the main notions of economic and financial management
of the farm
Objectives: By the end of this session you will be able to:
Aims & Objectives
To evaluate the performance of a farm
Look at the risk assessment of a farm
5. 5
The financial structure and cash-flow : the balance sheet of its farm
Reminder: what is the balance sheet for?
To read and to analyse the balance sheet
The activity and the profitability : the profit and loss account
Reminder : what is the profit and loss account for ?
To read and to analyze the profit and loss account
Training program
6. Training program
To understand the ratios of the financial analysis
Profitability ratios
Financial structure and solvency ratios
Liquidity ratios
To formulate a financial diagnosis
The different steps of the financial diagnosis
Social and environmental, economic use of performance indicators
6
7. HOW TO ANALYZE ITS BALANCE SHEET?
7
The two main lines of analysis of the economic health of a farm are
profitability and solvency. We will focus on the balance sheet analysis.
By the balance sheet, one can check to what extent the financial situation is
sound and if the production tool is properly financed. In a nutshell, is the
operation solid, solvent and how does it evolve over time?
8. BALANCE SHEET PHOTOGRAPHY OF YOUR OPERATION
8
Active = where does the money go? Passive = where does the money come from?
ASSETS
(use of resources)
LIABILITIES
(origins of resources)
Land
Installations
Equipment
Animals
Gross
Depreciations
and provisions Net
Social capital or operator
capital
The result of the exercise
Grants or provisions
Long and medium term loans
TOTAL VALUE
IMMOBILIZED
TOTAL PERMANENT
CAPITAL
Animals (in stock)
Supply stock
Operating income in
stock
Short term debts
Payables
Another debts
TOTAL STOCKS TOTAL DEBTS
Receivables
TOTAL RECEIVABLES
Bank
TOTAL AMOUNT TOTAL AMOUNT
Balance sheet fundamentals: what you own is listed on the
asset side, what you owe is on the liabilities side.
The asset values are divided into 2 categories: fixed assets
grouping the production tool and current assets (resources
mobilized by the production cycle).There are stocks,
receivables and money in the bank.
The liability includes the debts (L & M term loan, supplier and
financial debts of - 1 year).
Assets and liabilities being equal, the difference is the equity
shown at the top of the liabilities.This set forms the book
value of your operation. It can be far away
real value (land, buildings and materials among others).
The separation of professional and private assets adds to the
challenge of asset valuation.
But we have valuable elements to analyze.
From the balance sheet, one can calculate many ratios, some
more relevant than others. We will consider two that are the
key indicators of financial strength in the short and medium
term.
9. DEBT RATIO:
DEGREE OF DEPENDENCE ON THIRD PARTIES
9
The debt ratio is one of the main indicators of the financial analysis.
The percentage (debts / total assets) reflects the degree of fragility of the company in the medium term.
In other words, the importance of equity provides some independence from creditors.
It allows you to borrow in better conditions
If we accept that the debt ratio should not exceed 50%, this ratio must be reported on the date
the farmer's installation, the recent development of the farm and the legal form
(There may be off-balance sheet borrowings to finance the share capital).
If the debt ratio is high or very high (> 75%), it is essential that it move downwards and find a rate below 50%.
Agriculture implements large capital in terms of profitability.
An operation must not remain permanently indebted because the financial costs increase the income accordingly.
Let's not forget that it is this same income that contributes to increasing equity.
Finally, in the debt review, we must assess the weight of short-term debt, that is to say less than a year.They generate financial costs
and precariousness.
10. THE WORKING CAPITAL OF YOUR OPERATION
10
Farms must have a cash flow capacity to meet the deadlines as
and as they arrive.This capacity, more or less sufficient according to the farms, is measured
by working capital. It is obtained by the difference between permanent capital and fixed
assets (see balance sheet diagram). It's a revealer of the financial health of your business in
the short term.
Assets Liabilities
Sustainable jobs
- Intangible and financial fixed assets
Permanent capitals
- Equity
- Long term debts
Margin of safety: net working capital NWC
11. THE WORKING FUNDS OF YOUR OPERATION
Working capital must be positive. The means of financing must finance the production tool and the current
assets (stocks, advances in culture, receivables and bank).
The higher the working capital, the less the need for short-term financing (supplier or bank loans, overdraft).
The optimal working capital is variable depending on the production system.
The longer the recipes are spaced out, the more time it takes to have this cash advance to cover expenses.
The farm must advance the money for its purchases and salaries before receiving the receipts.
It is partially covered by the time allowed by the suppliers, but that is not enough.There remains a "NEED" to
finance, expressed in days of turnover and proportional to it.
Short term jobs
- Stocks
- Receivables
Working capital requirementWCR
Short term debts
-Payables
12. THE WORKING FUNDS OF YOUR OPERATION
The need to be financed must be less than the working capital, otherwise the company has cash flow problems.
Example:
In a cereals and field crops system where expenses are incurred before revenue, the working capital must cover 6 months of
expenses, ie 550 to 600 € / ha.The target is 800-1000 € / ha when the farm has a high proportion of industrial crops (25%
beetroot and potatoes).
On the other hand, on dairy farms, monthly milk receipts will more easily cover the coming deadlines. As a result, a working
capital covering 3 months of expenses will be enough, about 400 € / ha.
To monitor your working capital is to improve the profitability of your business thanks to small "plus" additions (avoid agios,
take advantage of discounts and buy in the dead season). Moreover, it is very useful to dialogue with his banker; your
management center advisor will help you analyze your own balance sheet.
Short term
needs
WCR
Short
term
debts
NWC
Uses
Sustainable
capital
Rest in cash
13. THE INCOME STATEMENT
Annual accounting document providing a description of
the 12-month operating expenses and revenues: the
financial year.
It allows to analyze the performances of the company.
The result is calculated by difference between products
and expenses.
3 mains categories of loads and products contribute to the overall performance:
1. Expenses and revenues related to current and usual operations; lead to the operating result
2. Financial expenses and income: interest on debts and investments of the holding; indicate the financial result
3. Exceptional expenses and income: from non-recurring transactions, including the purchase and sale of fixed assets; determine the
exceptional result
EXPENSES PRODUCTS
· Purchasing supplies · Sold production
· Subcontracting and external services
→ Plants, animals, services,
other products
· Rent and tenant fermage · Operating premiums
· Maintenance
· Dues and taxes
· Insurane
· Staff costs (+ social charges)
· Depreciation (expenses not
corresponding to a cash outflow) Operating profit
· Financial expenses (interest only and
no capital repaid)
· Financial products
Bottom line
· Exceptional expenses · Exceptional products
Exceptional result
14. INTERMEDIATE MANAGEMENT REBATE
How to analyze its result?
Exercise Previous Exercise Variation
Total % Total % Total
Sales
+ Change in production stocks
PRODUCTION
- Extraordinary charges
- Variation of supply stocks
OVERALL GROSS MARGIN
- Other supply charges
- External Services
ADDED VALUE
+ Grants, allowances
- Taxes
- Personal costs
EARNINGS BEFORE INTEREST, TAXES AND AMORTIZATION
+ Other products
- Economic depreciation
- Supplies
OPERATING RESULT
+ Financial product
- Financial expenses
CURRENT RESULT
+ Sales value of fixed assets
+ Other exceptional products
- Tax depreciation
- Accounting values of fixed assets sold
- Other exceptional charges
NET PROFIT
The economic result is obtained by difference between products
and expenses.
It is possible to measure masses by taking into account some of the
products and loads.
Intermediate results, called intermediate management balances,
are thus determined.
The most used are:
Added value: VA
Earnings Before Interest, Taxes and Amortization: EBITDA
The interest of these balances makes it possible to:
Improve knowledge and analysis of the economic
performance of the farm
Make comparisons between farms at an operational level.
EBITDA excludes depreciation and financial expenses
Make comparisons with other sectors of economic activity.
15. PROFITABILITY OF A PRODUCTION
CALCULATE GROSS MARGIN
Different activities or workshops make up the
farm.
The difference between variable income and
expenses generated by an activity must be as high
as possible: this is the gross margin.
If the gross margin is low, it is necessary to
question:
Technical issues ?
Unfavorable buying or selling conditions?
Combination of insufficiently effective activities?
Lack of productivity?
Wheat Maize Sunflower Colza TOTAL
Sold production (turnover excluding taxes)
- Initial stock value
+ Value of the final stock
(1) = Total products
Seeds
Fertilizer
Pesticides
Food
(2) Total operating expenses
= Gross Margin (1) - (2)
= (Gross Margin / total products) X 100
Area
Gross Margin / hectare
16. PROFITABILITY OF A PRODUCTION
INTEREST OF THE GROSS MARGIN
There are basically two types of charges that relate to an activity:
Directly and easily assignable to an activity, appear and disappear with them: these are the variable loads;
Related to the production device, requiring certain conventions, some distribution keys to be assigned to an activity or
workshop: these are the fixed loads.
Gross margin: difference between income and variable expenses
The level of gross margins varies according to the size of the variable charges and their combination, one can find there the
technicality of the operator.
The gross margin has two interests:
it indicates the contribution of a workshop to the formation of the result by the cover
fixed charges; in the short term, it is a tool for orienting exploitation by seeking a better combination of activities
it allows comparisons between farms with the same production structures
We then seek improved margins through a better efficiency of variable factors, called inputs.
17. PROFITABILITY OF A PRODUCTION
CALCULATION OF THE GROSS MARGIN
The activity product is obtained as follows:
Yield x price obtained + allowances and premiums
(premiums becoming more and more important).
Variable expenses express the consumption of goods or services directly related to the production cycle.
Consumption is equal to purchases adjusted for inventory change (initial stock - final stock).
These are the variable loads related to the surface (fertilizers, treatments ...) to which may be added the
specific variable loads related to a production workshop, such as animal loads (livestock feed purchased and
collected, veterinary costs ...).
18. CALCULATION OF MECHANIZATION COST
Reported per hectare, it indicates the amount of costs related to the use of equipment on the farm.
Assurances matériel ……………………………..
Entretien …………………………………………
Energie …………………………………………..
Frais de récolte et travaux ……………………….
Amortissements / Equipements …………………
Frais financiers / Equipements …………………..
TOTAL Frais de Mécanisation
Surface …………………………………………..
Coût de mécanisation / ha
This cost will be used in the calculation of the cost of
production and the threshold price.
Material insurance
Maintenance
Energy
Harvesting costs and works
Depreciation / equipment
Depreciation / Financial expenses
TOTAL mechanization costs
Area
Mechanization costs /ha
19. CALCULATION OF PRODUCTION COSTS IN
AGRICULTURE
To calculate the cost price of a production consists of calculating exactly how much the production of a quintal of
wheat, corn or rapeseed ...
The marketing threshold is the threshold selling price above which all costs (including the farmer's remuneration)
are reimbursed.
In all sectors of economic activity, especially in industry, the manufacturers of a product begin by calculating how
much it costs to manufacture, to then determine a selling price.
Ideally, it should be the same in a farm, for its different productions.
20. CALCULATION COST OF RETURN AND
MARKETING THRESHOLD PRICE
To calculate the cost price, it is necessary to make an inventory of the various expenses of the exploitation, to then
impute them with each quintal product.
There are two types of charges:
A. Operating expenses (directly related to the activity)
- Entrants who enter the technical itinerary of a crop: seeds, phytosanitary products, fertilizers, harvesting costs
per company, hail insurance, etc.
(for milk or meat, it would be food ...).
These charges disappear if there is no production.
B. Structural costs (existing outside any production activity)
- operation: maintenance costs for equipment and buildings, fuels and lubricants, insurance, purchase of tools for
the workshop or office expenses
- company commitments: depreciation (plant) of equipment and buildings, salaries paid to staff, seasonal or
permanent, financial expenses
- Operator's commitments: rent, property taxes, social security contributions and labor remuneration provided by
the farmer.
21. EXAMPLE: COST OF A VEGETABLE EXPLOITATION
Cost price of a farm with 100 ha of UAA, including 50 ha of wheat
(yield achieved: 85 qx / ha of wheat on average).
This farmer has 400 € / ha of operational expenses for this crop.
The total of its operating expenses is 13.000 € for the exploitation, that is to say 130 € / ha.
Its expenses related to the commitments of the company represent 25,500 €, or 255 € / ha, those related to the commitments
of the operator represent 68.000 €, or 680 € / ha (including a salary of 20.000 € / year).
He has 8.500 € overhead on his farm, or 85 € / ha.
Its gross cost price or its wheat crop is therefore:
400 € / ha + 130 € / ha + 255 € / ha + 680 € / ha + 85 € / ha) / 85 q x / ha = 18 € / q
Cost: 18 € to produce a quintal of wheat.
The determined net cost, we can calculate the threshold of marketing.
At the net cost price, the premiums collected per hectare (coupled and decoupled premiums) are deducted.
If the farmer receives 340 € of premium per hectare, this represents 340 € / 85 q = 4 € / q
Marketing threshold for this farmer: 18 € / q - 4 € / q = 14 € / q
The interest is to have cost prices and marketing thresholds as low as possible.
We note that it is important to lower the load of structures, especially the loads mechanization (Cooperative use of agricultural
equipment, mutual aid, common rotation, ...).
22. COST OF PRODUCTION AND
COST OF RETURN OF MILK
Loads
suppletive
104
Milk Price
326 €
28 Another loads
12 Financial Charges
20 Workforce
16 Landed
20 Building
64 Mechanization
49 Other operating expenses
81 Food Cost
Structural
loads
160
Loads
Operational
130
Productioncost290€
Pricecost394€
23. INVESTMENT AND
WORKING OF AN OPERATION
Investment is a complex operation that always fits into an overall development strategy of the operation,
because it allows:
growth in operating capital and production
the substitution of capital for work, therefore a better match between the dimension of the tool and the
availability of work
the improvement of the working conditions: execution of the tasks, comfort, safety ...
the reduction of certain hazards limiting production (irrigation, drainage ...)
Investment refers to financial capital, buildings, equipment, but also herd increase, financial participations, market
research costs ...
24. FINANCING INVESTMENTS
The rule: Because of its sustainability, an investment must be financed by permanent capital and not by short-term or
very short-term cash resources to avoid cash flow problems.
It is necessary, for prudential reasons, that the permanent capital be greater than the total amount of investments
made.The gap (permanent capital - fixed assets) is a stable resource reserve called the Working Capital Fund.
The sources of permanent capital are:
- self-financing: internal resource taken from the annual balance of current operations of the farm; it thus depends on
arbitrations of which this balance is the object (private levies, annuities of current loans)
- subsidies: granted for certain operations, aid for modernization, compensation for handicaps, upgrading to European
standards and granted at certain privileged moments in the farm life cycle (installation)
- loans: medium and long term
- the initial investment and the personal contributions of the operator
25. AUTOFINANCING OR BORROWING?
By making too much self-financing, for the sake of safety, the farmer deprives himself of expansion
possibilities by drawing on his working capital.
By using too much borrowing, he runs the risk of having trouble repaying, or even worse, being
unable to do so.
There is therefore a balance to be found between self-financing and borrowing, which ensures both
security, sustainability and development of the farm.
26. FINANCIAL HEALTH OF OPERATIONS AND TREASURY
The income approach is necessary to appreciate wealth creation and profitability. However, this approach is
insufficient, this wealth may be only potential in the case of receivables (what customers still need) or inventory
(unsold, they are not cash generators).
On the other hand, the calculation of income is subject to conventions such as:
depreciation (variable periods, linear or declining mode, resulting in different profitability, without modifying
revenue from the activity)
valuation of stocks
The cash-flow approach is complementary to that of profitability and makes it possible to highlight cash flow
problems with multiple causes.
PROBLEME
DE
TRESORERIE
Aléa
Investissements
mal financés
Capitalisation
trop rapide
Conjoncture
économique
défavorable
Besoin en fonds
de roulement
mal évalué
Investissement
dont le coût réel
dépasse la prévision
Prélèvements privés
trop importants
Insuffisance
de rentabilité
cash flow
problem
Alea
Lack of
profitability
Private levies too
important
Investment whose actual cost
exceeds the provision
need for badly assessed
working capital
Unfavorable economic climate
Poorly funded
investments
Capitalization too
fast
27. SOME DEFINITIONS
Net assets Difference between assets and balance sheet debts. It expresses the heritage value of the company.
Amortization
Sum set aside corresponding to the loss of value (discount) of a good that one possesses (building, car, machine ...), in order
to replace it in the same way.Tax rules determine the amount of annual depreciation called amortization expense.
Supply Raw material or components delivered for resale or incorporation into the manufacture or packaging of a product.
Self-financing Part of the profit of the company not distributed to the shareholders in addition to the depreciation made during the year,
making it possible to finance new investments.
WCR Working capital requirement: difference between, on the one hand, inventories and operating receivables, on the other
hand, operating debts.
Balance sheet Annual and quantified inventory of assets and debts of the company on a specific date, "photography" of the company.
Budget Prediction of objectives and means used as a reference for the company, must be updated according to the events and the
level of activity.
Cash flow Net profit of the company distributed or not + amortization of the year ("what we have earned and we can use + what we
put aside to replace what is used").
Equity
All the financial resources belonging to the company. They mainly include capital, previous profits retained as reserves or
retained earnings, capital gains generated either by inflation (revaluation differences) or by financial transactions (merger,
contribution, etc.). , and regulated provisions.
Turnover Amount of invoices sent to customers. Corresponds to deliveries made over a period, in relation to the normal business
activity. Always expressed without taxes.
Income statement Summary of all expenses and products of the company over a period. It allows to know the result by difference. This is the
"film" of the events of the year.
28. SOME DEFINITIONS
Discovered (or current
bank loan)
Difficulty of temporary cash flow over a relatively short period. The bank helps with a loan (usually quite expensive)
provided that it has been consulted beforehand.
Net debt Financial debts (lines of credit, bank loans, bonds, etc.) less available cash (cash and cash equivalents). See also ratio of net
debt to equity and ratio of net debt to cash flow.
Net working capital
Gap between the situation of sustainable resources and the situation of stable jobs. Defined (curiously) by the financing
table and not directly by the balance sheet. Global net working capital can also be defined as the difference between:
• on the one hand, the sum of equity, provisions, financial debts exceeding one year
• on the other hand, the sum of net fixed assets and receivables more than one year old
Writedown Loss suffered during the resale of an action or property. Difference, net of fees, between the purchase price and the selling
price.
Exceptional operations Part of the income statement corresponding to transactions of an exceptional nature in relation to current operations such
as, for example, a transfer of assets.
Financial operations Part of the income statement corresponding to transactions with banks or financial institutions or third parties involving
financial assets or liabilities.
29. SOME DEFINITIONS
Investment plan and
financing
It is a kind of cash plan spread over 2 to 5 years (10 to 20 years in heavy industries), in order to spread over time the
stable jobs (planned investments) and the sustainable resources (capital and loans) opposite. The differences, by partial
period, and over the entire period, indicate the needs and the surplus of resources.
Capital gain Profit realized by selling something that one possesses (building, machine, car, share ...) to a higher value of its book
value (purchase value - possible depreciation). A negative difference is called "less value".
Provisions for risks and
charges
Registration of a possible future cost and / or probable operating costs and, in return, liabilities, the potential outflow of
money, comparable to a possible debt. In general, provisions for risks and charges are deductible from the tax base; but
the tax administration admits of their deductibility only if they are created by a real and serious fact.
Profitability Relationship between a result and the means implemented to obtain it (eg profitability of a machine, an investment, an
activity ...).
Financing table Table of uses and resources that explains the overall changes in the company's assets during a given period. Table
showing the resources of a period, their source and category, secondly, the jobs of the same period, their use by
category, by heading, by post that the company has made of its resources.
Value added tax (VAT) It is an indirect tax borne solely by the final consumer of the product or service. Companies recover most of the VAT
they pay on purchases and return theVAT they collect on sale to the State.
Editor's Notes
The assessment describes the heritage situation of the holding at the end of the financial year. It presents in front of the asset to on the left and the passive on the right, whose accumulations are definition of equal value. Balance sheet assets reflect the means owned by the operation and implemented to carry out his activity. It includes fixed assets which are the goods necessary for the productive process, such as land, buildings, materials or breeding animals and circulating assets that essentially represent the resulting goods and receivables of the production process, including stocks.
The liability describes the resources mobilized by the holding to finance the means implemented, the indebtedness constituting the contribution of the partners and the equity of the operator.
The structure of the balance sheets is largely conditioned through the production process. It differs significantly from one orientation to another. For example the share of fixed assets in total assets reaches 75% for specialized farms in herbivore breeding. It is lower among vegetable orientations, 64% for field crops and only 41% for the viticulture of appellation. The importance of capital own is also conditioned by the production process. Wine farms, which often carry out the breeding and storage of wine, largely the financing of their activity on equity. In market gardening and horticulture and pigs, poultry, shorter production cycle does not require equity financing in such a large proportion.
The debt ratio (ratio of all debts balance sheet total) measures the contribution of resources external to exploitation in financing its activity. It reflects the degree of dependence of the farm with its creditors.
The rate average debt is 40%.
To produce wealth, a farm, like any business, implements the goods it owns (balance sheet assets) and uses labor (number of annual work units). The contribution of each of these factors in the production of the farm is evaluated by their intensity. Capital Intensity (Balance Sheet Assets Relative to Value added increased operating subsidies) the value of the means to be implemented to create a unity of wealth. Farms specialized in breeding herbivores must, in proportion to the created wealth, bring more capital than the predominantly vegetable farms, in particular those market gardening, horticulture and fruit.
If the balance sheet is a financial state of affairs at a specific moment, the income statement presents the results economic activity during a fiscal year. It relates to the activity of the company, to its function of production (of goods and services), and not to its heritage status. It highlights the performance achieved by the company during the year. It brings together products and expenses consumed during the period and to determine the result (profit or loss).
Operating expenses : fertilizers, amendments seeds Treatment products Livestock feed Fuels, lubricants Workshop supplies Office supplies Animals Water, gas, electricity Supplies, maintenance (bricks, cement etc ...) / Fermages and rentals Maintenance expenses (labor) insurance Documentation Works undertaken (harvesting, plowing ...) Publicity Veterinarian, notary Transport Professional fees / Taxes and assimilated taxes Property tax ✔ Staff costs Salary MSA fees ✔ Current management expenses Accounting fees ✔ Depreciation correspond to depreciation charges
Financial charges Interest on loans contracted
Extraordinary charges They mainly correspond to: - penalties - penal and fiscal fines, - donations, - on the market (eg a farmer will have to pay a deduction if he can not deliver products from his harvest to a trading customer.) - the carrying amounts of the assets sold (ex: disposals of fixed assets)
The products of the exploitation ✔ Sales sale of goods animal sales other production sold, ...
Financial products: Interest paid to the company (shares, discount for quick payment), ...
The exceptional products: proceeds of previous years, entered during the financial year and not provided for in the receivables. Drought allowance Sale of building land Depreciation of equipment subsidies, ... Proceeds from the sale of assets
Periodically, it is necessary to take stock of the resources created or consumed as a result of the activity of the exploitation: it is necessary to determine the result of the period. The comparison between the expenses and the products of a period makes it possible to determine the result of the period.
The result which is the difference between the products and the expenses can be profit or loss. he thus shows the profit or loss of the exercise. Two cases are possible: the result of the exercise can be positive or negative.
It is equal to the difference between the gross product corresponding to the total revenue of exploitation and proportional charges, which are necessary for a specific production and which disappear because of the influence (rent, share of social contributions, fuels, equipment maintenance expenses ....). The gross margin thus calculated is reduced to the hectare. We then obtain a net income that is capitalized over a number of years.
Revenue, expenses and gross margin per culture are enough criteria accessible for farmers. They measure the impact of technical conduct and choices on the result.
Pay attention to conclusions too fast. The gross margin should not be the only decision criterion, it must be associated with other elements of analysis (eg working time).
The distinction between variable loads (operating expenses or operating expenses) and fixed expenses (also called structural or structural expenses) is essential because it makes it possible to determine certain key data related to the profitability of a company.
A variable load, activity charge or operational charge, represents a charge related to the operation of the company. It varies according to the volume of activity: the more the activity progresses, the more the variable expenses are important; and vice versa. The following are examples of variable loads: purchases of goods, purchases of materials, subcontracting, energy consumption (case of production companies), salaries of operational staff (when indexed to the activity), commissions.
A fixed load, structural charge or structural charge, is a charge that is related to the existence of the business. It does not depend on the activity, i.e. it remains independent of the level of sales or production. It will therefore be supported by the company and disbursed, whatever happens and even if no turnover has been generated. Examples of fixed costs are: rents (movable or immovable), insurance, salaries of administrative staff, certain fees (lawyer, accountant), depreciation of fixed assets.
the gross margin is equal to the difference between the gross product which corresponds to the amount of the total revenue entered in the operating account and the proportional charges which are necessary for a given production and which disappear with the abolition of the lands allocated to this production.
It is usually reduced to the hectare.
The elements necessary for the calculation of the gross margin are derived from the standard operating accounts prepared annually by the administration for the basis of flat-rate agricultural profits for the tax regions.
Gross margin is the most used cost accounting tool in the analysis of results by activity of a holding. It makes it possible to highlight the crops that "seem" the most profitable (to be taken with caution) and to measure the various activities between them. Finally, it allows to know if an activity allows to "earn money" or not, by comparing the gross profit margin with the CS / unit (calculation of the net margin)
The product of the activity is the market value of the total production of goods and services generated by the activity during a campaign. Be careful, do not forget the internal disposals, that is to say the goods and services that are reused in the production system instead of being sold outside.
There are two possible approaches to calculating the product of an activity:
an accounting approach: the elements composing the product of an activity can be found in the accounts of the company;
a direct approach: the product is obtained by the following calculation:
Yield x price obtained + allowances and premiums
(premiums becoming more and more important).
The mechanization job remains complex to analyze because it covers a wide range of expenses that can have a great variability from one year to the next.
Among these items of expenditure we find:
The consumption of fuel oil: for this single item of expenditure several factors influence the overconsumption of fuel A parcel or ungrouped, the types or the state of the grounds, the adjustments and the maintenance of the material, the mode of driving, the system Feeding cows for grazing and reducing the hours of distribution of mulching fodder and cleaning. For this last example it is estimated on average a saving of 30 liters of fuel oil per hectare UAA.
Maintenance of the equipment: with regular maintenance of the equipment park of the farm it can be hoped an improvement in the longevity of the machines limiting on the one hand the costs of repairs and on the other hand a reduction of depreciation. Another method to limit the weight of this job is to pool a powerful equipment to optimize, the cost of maintenance and depreciation with the use of a CUMA with driver, or an ETA. But be careful to adapt your own equipment park within the farm, to avoid duplication.
The choice of investments: it is crucial to reason each investment so as to avoid the pitfall of the over-sized equipment park. Because in times of crisis the over-mechanization can very quickly penalize the cost of production. Unsuitable equipment represents a surcharge of € 15 to € 20 / 1,000 liters. The traction station is one of the basic position to be mastered It must ideally be below the 3 HP / ha of UAA, A renewal of head tractors every 8 years allows a recent equipment park and therefore less subject to heavy repairs.
Recall :
Production costs :
There may be variations, but in general, a budget of production costs includes the following topics:
Operating revenue: Gross operating income from the sale of crop or livestock products before removal of any operating expense.
Direct variable costs: Costs directly attributable to a product. The amount of these costs varies according to the volume of production (this is the case for the costs of seeds, fertilizers, pesticides and feed).
Indirect Variable Costs: Costs incurred in the production of all products on the farm (ie, fuel, labor and utilities costs). The amount of these costs also varies according to the volume of production.
Fixed Costs: Costs the amount of which is independent of the volume of production (ie property taxes, fire insurance and depreciation).
Net income (loss): A positive (negative) difference between total revenue and total variable and fixed costs.
Cost of return :
The breakeven or production cost is the price in € / t at which you must sell your grain to pay all fixed and variable costs on your farm. You will sometimes read the breakeven: it is actually the price beyond which you will be able to pay you. However, it is often expressed in terms of the number of days, the number of hectares, the number of tonnes or liters of milk produced. For example, from the moment you sold 200 t of wheat you paid back all of your expenses and you will be able to pay for the extra tonnes.
The cost price or marketing threshold is the price that allows you to repay all of your expenses and integrates your own remuneration for your work. In general, you get from this price the PAC subsidies you receive elsewhere.
Your target price is the one you are aiming for that includes expenses and your salary, but also allows you to earn a margin that will allow you to save money or invest in your farm.
It is important that you know these different prices that will allow you to define your marketing strategy.
Be careful, these prices are specific to each production system and each farm. They are also variable from one year to the next. You will have to update them regularly.
To calculate them, take out your calculators:
What are your fixed costs: depreciation, material, building ...
What are your variable costs (which depend on the number of hectares): seeds, fertilizer, fuel, ...
What salary would you like to receive?
How much do you receive from compensatory aid under the CAP per hectare?
What is your yield per hectare?
Cost of production in € / t = sum of your charges / output
Cost price in € / t = (sum of your expenses + remuneration - help PAC) / output
The profitability / investment pair is inseparable. Difficult to invest without waiting for sufficient profitability to generate income and repay loans.
The investment must therefore be reasoned not to compromise the economic equilibrium and limit the risk taking associated with any project. The current situation is more and more unpredictable hence the interest to make calculations and projections before embarking.
In the same way, it becomes more and more difficult to be financed in case of lack of profitability. It is a vicious circle that can cause serious difficulties whereas the investment would be necessary to improve this profitability (new buildings more efficient ...).
Pork production has been very concerned for a few years with a decline in profitability and investment needs to remain competitive.
The investment / income link is very strong in agriculture. As soon as the income drops, the investment falls (very clear trend in milk production during the crisis of 2009). Everyone is waiting for the recovery, producers and bankers while the investment is a project over a few years.
The profitability / investment pair is therefore not perfect because the two are sometimes too close to each other.
Finally, investment is necessary but not an end. We see it especially in milk when the enlargement has been poorly prepared or anticipated. Profitability is deteriorating and exploitation can be in difficulty.
Managing an important project requires a good pilot and preparation.
To elaborate the financing plan is to put in front of the cost of the installation the necessary financial resources. These resources can be of various kinds: prior savings, contributions in kind, deferred salary, family loan, credit transfer or bank loan (subsidized or not).
This is the moment of truth, the viability of the project is at stake. The finalization of a project often involves the combination of several of these resources.
This step sometimes highlights an imbalance between project needs and resources. It is then necessary to take over the different components of the project to analyze if it is possible to improve the profitability, to reduce the costs or to postpone the installation.
Self-financing:
Self-financing is the ability of the farm to finance its activity as well as its investments using its own financial means. It is a method of financing internal to the company, which essentially consists of accounting depreciation.
Cash flow is the result of the sum of amortization charges (expenses necessary for the renewal of equipment), reserves (provisions and undistributed profits), capital gains, equity, prior years and savings. . It corresponds to the increase in the actual net assets of the enterprise during a given period.
It is important to point out that recourse to self-financing has a cost and still involves certain risks.
Indeed, before being able to afford to be self-financing, the farm must have sufficient means, which allow it to invest in new projects. It is also important to know that these projects can prove to be fruitless, and thus generate big losses for the company and its shareholders. The use of these reserves, mainly intended to remunerate shareholders, must therefore be carried out in a vigilant and organized manner.
Borrowing :
Rather than self-finance an investment by taking cash out of your farm, it may be more appropriate to apply for a loan:
you preserve your cash flow so that you can meet your short-term obligations (current expenses, inventories, suppliers),
you benefit from the tax deductibility of interest on the loan (or rents in leasing) which are considered as a charge for the business,
you keep your cash and you can get it paid on short-term savings investments.
However this is the bank loan is not without risks, and should avoid:
Minimize the amount you need to borrow to keep your business running smoothly.
Creators often tend to underestimate their needs to limit indebtedness. Do not fall into this trap! A good evaluation of your needs will result in:
- secure the start of your business by anticipating the cash gaps you will inevitably encounter,
- give credibility to your file with regard to a financier,
- and thus facilitate the obtaining of financing.
To act with haste. Take the time to prepare your project. Your presentation must be complete, precise, clear and neat ... in a word "salesman"!
Farm management: real-time results
Cereal growers want to anticipate their results in order to be reactive to the price fluctuations of cereals and make the right decisions, including valuation. The objective is not only to determine the results of the last closing but to evaluate those of the next two years.
For this, the managers specializing in the production of cereals have at their disposal a new tool that allows to determine precisely the accounting results of the following year. From the harvest, the customer knows his economic results with several months in advance. No need to wait for the next accounting close. This analysis can also be done upstream using yield and price estimates.
Manage to arbitrate
In the case of tense cash, the calculation of the equilibrium point makes it possible to identify the periods during which the needs are the most important. Depending on the size of the deficit, one or more corrective actions will have to be considered. The reduction of charges and the use of a short-term loan to finance the production cycle are preferred, before a readjustment of private levies.
Secondly, the use of credit opening is a less expensive solution than supplier credit. It can be useful to deal with hazards and allows to join the two or three months before the payment of aid. If necessary, we must think about structural actions. Reducing annuity payments, financing debt with a self-financing asset, or taking long-term bank loans with short-term loans are all solutions to consider.
In most cases, the banker is at the heart of the device. Before asking, it is imperative to have all the elements of control because it will be necessary to convince him. The objective is to demonstrate that the exploitation is structurally viable and that the demand is to cope with a difficult situation.
Medium-term vision
The analysis goes even further because, starting from the future rotation, the results will be estimated over the next two years. In concrete terms, this means that, from now on, we will evaluate the 2018 results, while the 2017 cereal harvest has not yet taken place. Of course, the climatic and cyclical vagaries are numerous but piloting in prospective offers many advantages.
With the forecast equilibrium price, the operator knows in advance his break-even point for each crop. With the real-time production cost, he can tailor his sales strategy to the campaign.
The estimation of its economic results for the next two years makes it possible to adapt its social and fiscal trajectory and make the necessary arbitrations. Investment policy is also greatly facilitated.