3. The process of extracting information from financial
statements to better understand a company's current
and future performance and financial condition
Financial Statements analysis
4. Analyzing the broader Business Environment
Risk
Life cycle Output Buyer Input
Labor
Governanc
e
Financin
g
Competiti
on
5. Basics of Profitability Analysis
To see why a company is performing the way it is and where it is heading.
The Financial Statements are used by managers to improve the firm’s stock
stock price; by lenders to
evaluate the likelihood that borrowers will be able to pay off loans; and by
security analysts to
forecast earnings, dividends and stock prices.
Financial Analysis involves:
• comparing the firm’s performances to that of the other firm’s in the same
same industry, and
• Evaluating trends in the firm’s financial position over time
6.
7. Financial Ratio Analysis
• liquidity Ratio
• Profitablity
•Asset management
Ratio
•Market book ratio
•Debt management
Ratio
8. The DuPont Disaggregation Analysis
DuPont Equation
– shows that the rate of return on equity can be found as the product of
profit margin,
total assets turnover and the equity multiplier
- shows the relationships among asset management, financial leverage
management
and profitability ratios
