The document discusses financial health at both the individual and company level. At the individual level, it discusses the importance of financial health and its key components like spending, saving, borrowing and planning. It also lists indicators of strong financial health. For companies, the document examines factors like liquidity, solvency, profitability and operating efficiency as important metrics to evaluate financial health. It also discusses types of financial risks companies face like credit, market, liquidity and operational risk. The document provides details on measuring and assessing these various aspects of personal and corporate financial health.
This document discusses financial statement analysis, which involves reviewing a company's financial statements like the income statement, balance sheet, and cash flow statement to assess the company's financial health and performance over time and relative to other companies. Key aspects of financial analysis include evaluating profitability, solvency, liquidity, and stability using tools like ratio analysis, comparative statements, common size statements, and trend analysis. The results of financial analysis are used by various interested parties like management, investors, and creditors to evaluate financial performance, position, operating efficiency, and predict future performance.
Financial Reporting And Analysis Explained.as to why is it important, Who is it important for and the different ways of analyzing a financial statement.
Greenwich University
Financial statement analysis involves calculating ratios to evaluate a company's profitability, liquidity, asset use, financial stability, and market performance over time. It is more than just analyzing numbers - it requires understanding a company's industry, strategy, annual reports, economic conditions and more. For the Quorum Group, the investor should calculate relevant ratios such as profit margins, asset turnover, debt-to-equity, and compare trends over time to evaluate the company's financial performance and position for investment purposes.
This document provides an introduction to key concepts in corporate finance including what corporate finance is, its relationship to financial accounting and management accounting, the concepts of risk and return and time value of money. It discusses corporate structure including sole proprietorships, partnerships and corporations. It describes the finance function and role of the financial manager in raising, allocating and returning funds. It also covers separation of ownership and management and issues of agency theory and corporate governance.
The document discusses various financial ratios used to analyze the financial position of a business. It defines financial ratios as relationships between accounting figures expressed mathematically. Financial ratio analysis is used to study information in financial statements, ascertain a business's overall financial position, and interpret key information. The document then discusses various types of ratios including liquidity ratios, solvency ratios, activity ratios, and profitability ratios. It provides examples of specific ratios like the current ratio, quick ratio, debt-to-equity ratio, and return on assets ratio and how they are calculated and interpreted.
Financial statement analysis involves analyzing a company's financial statements to assess its performance and financial position. It is used to evaluate factors like profitability, solvency, liquidity, and efficiency. Key tools for financial statement analysis include financial ratios, common size analysis, trend analysis, and comparisons to industry standards and past performance. The purpose is to provide useful information to decision makers about a company's historical performance, current condition, and future prospects.
A comprehensive evaluation of an investor's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.
Most individuals work in conjunction with an investment or tax professional and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing the plan. These will be used along with estimates of asset growth to determine if a person's financial goals can be met in the future, or what steps need to be taken to ensure that they are.
This document discusses financial statement analysis, which involves reviewing a company's financial statements like the income statement, balance sheet, and cash flow statement to assess the company's financial health and performance over time and relative to other companies. Key aspects of financial analysis include evaluating profitability, solvency, liquidity, and stability using tools like ratio analysis, comparative statements, common size statements, and trend analysis. The results of financial analysis are used by various interested parties like management, investors, and creditors to evaluate financial performance, position, operating efficiency, and predict future performance.
Financial Reporting And Analysis Explained.as to why is it important, Who is it important for and the different ways of analyzing a financial statement.
Greenwich University
Financial statement analysis involves calculating ratios to evaluate a company's profitability, liquidity, asset use, financial stability, and market performance over time. It is more than just analyzing numbers - it requires understanding a company's industry, strategy, annual reports, economic conditions and more. For the Quorum Group, the investor should calculate relevant ratios such as profit margins, asset turnover, debt-to-equity, and compare trends over time to evaluate the company's financial performance and position for investment purposes.
This document provides an introduction to key concepts in corporate finance including what corporate finance is, its relationship to financial accounting and management accounting, the concepts of risk and return and time value of money. It discusses corporate structure including sole proprietorships, partnerships and corporations. It describes the finance function and role of the financial manager in raising, allocating and returning funds. It also covers separation of ownership and management and issues of agency theory and corporate governance.
The document discusses various financial ratios used to analyze the financial position of a business. It defines financial ratios as relationships between accounting figures expressed mathematically. Financial ratio analysis is used to study information in financial statements, ascertain a business's overall financial position, and interpret key information. The document then discusses various types of ratios including liquidity ratios, solvency ratios, activity ratios, and profitability ratios. It provides examples of specific ratios like the current ratio, quick ratio, debt-to-equity ratio, and return on assets ratio and how they are calculated and interpreted.
Financial statement analysis involves analyzing a company's financial statements to assess its performance and financial position. It is used to evaluate factors like profitability, solvency, liquidity, and efficiency. Key tools for financial statement analysis include financial ratios, common size analysis, trend analysis, and comparisons to industry standards and past performance. The purpose is to provide useful information to decision makers about a company's historical performance, current condition, and future prospects.
A comprehensive evaluation of an investor's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.
Most individuals work in conjunction with an investment or tax professional and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing the plan. These will be used along with estimates of asset growth to determine if a person's financial goals can be met in the future, or what steps need to be taken to ensure that they are.
This document discusses various financial ratios that can be used to analyze the financial performance and health of a company. It provides definitions and formulas for key liquidity ratios like current ratio and quick ratio, leverage ratios like debt-equity ratio, activity ratios like inventory turnover ratio and average collection period, and profitability ratios like gross profit margin ratio. Specific calculations are shown for a company to illustrate how to compute various ratios from the company's financial statements. The document emphasizes the importance of ratio analysis for evaluating a company's performance over time and in comparison to other companies.
The document discusses the role and functions of a finance manager. It defines financial management and outlines key responsibilities of a finance manager, including determining financial needs, selecting sources of funds, conducting financial analysis, establishing an optimal capital structure, planning and controlling profits. The finance manager is responsible for securing adequate funding, investing funds profitably while managing risk, planning future operations, and controlling current performance through financial reporting and budgeting to guide efficient allocation of resources and achieve adequate returns.
Ratio analysis involves calculating and interpreting various financial ratios to evaluate a company's liquidity, solvency, operational efficiency, and profitability. Key ratios include current ratio, quick ratio, debt-to-equity ratio, inventory turnover, gross profit margin, return on equity, and earnings per share. Ratio analysis is used to analyze a company's financial health and performance over time as well as compare it to other companies.
Working capital refers to a company's short-term assets and liabilities. There are two main concepts of working capital - gross working capital, which is the total investment in current assets, and net working capital, which is the difference between current assets and current liabilities. A company's working capital requirements are determined by factors like its nature of business, production cycle, and seasonal needs. There are different approaches to financing working capital, including the hedging approach of matching debt maturities to needs, the conservative approach of financing all current assets with long-term debt, and the aggressive approach of relying more on short-term debt.
Financial Analysis and Types of Financial AnalysisNEETHU S JAYAN
The document discusses financial analysis, which involves critically examining financial statements to understand a firm's financial position and performance. Financial analysis identifies strengths and weaknesses by establishing relationships between balance sheet and income statement items. It has several objectives, including providing reliable financial information to assess a firm's profitability, financial position, and ability to meet obligations. Financial analysis can be conducted internally or externally and has various types depending on the materials used, methodology, entities involved, and time horizon considered. Its limitations include potential to mislead users or make wrong judgments if not done properly.
The document discusses the scope of financial management based on three approaches: traditional, transitional, and modern. It focuses on three major areas that constitute the scope: investment decisions, financial decisions, and dividend decisions. Investment decisions involve selecting long-term and short-term assets, including capital budgeting and working capital management. Financial decisions relate to choosing an optimal capital structure and sources of financing. Dividend decisions balance distributing profits to shareholders versus retaining profits for future business needs.
The document discusses liquidity ratios, which analyze a firm's short-term financial position and ability to meet current liabilities with current assets. It defines the current ratio as current assets divided by current liabilities, with 1.5:1 typically considered satisfactory. The quick or acid test ratio measures a firm's ability to use quick assets like cash to pay current liabilities immediately, excluding inventory from current assets. Both ratios above 1 indicate a company can meet short-term obligations, while ratios below 1 suggest potential issues with liquidity. The document provides an example calculation of both ratios.
The DuPont analysis breaks down return on equity (ROE) into three components: net profit margin, total asset turnover, and financial leverage. This allows companies to identify which specific factors are driving ROE and how they can be improved. The analysis provides a more comprehensive understanding of a company's profitability and valuation than looking at ROE alone. It is useful for comparing competitors and determining whether high ROE is due to sustainable or risky factors.
Financial Statement Analysis: Learn The Best Tricks And Tips!Andrew Li
Learn how to read financial statements and SEC filings like an investing pro!
Also, check out the last 2 pages for an amazing and exclusive discount offer for my Udemy course on financial statement 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.
This document discusses the key concepts of financial management including its meaning, scope, objectives and related disciplines. Financial management aims to maximize shareholder wealth through investment analysis, working capital management, capital structure decisions, and dividend policy. The scope of financial management has evolved from a traditional approach focused on capital markets to a modern approach providing a framework for strategic financial decision-making. The objectives of financial management are typically profit maximization or wealth/shareholder value maximization. A case study on Reliance Industries outlines its strategic vision to reinforce its existing businesses and pursue new opportunities in industries like petroleum, retail, telecommunications and education.
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.
The document discusses various types of ratios used in ratio analysis for evaluating the financial performance and position of a business. It provides definitions and interpretations for liquidity ratios like current ratio and quick ratio, solvency ratios like debt-equity ratio and proprietary ratio, activity ratios like stock turnover ratio and debtor turnover ratio, and profitability ratios like gross profit ratio, net profit ratio, and return on capital employed. Formulas and ideal ratios are given for each type of financial ratio.
This document provides an overview of finance and key concepts. It discusses what finance is, the functions and areas of finance, and compares finance to accounting. It also outlines the goals of business as maximizing shareholder wealth. The document reviews types of businesses including sole proprietorships, partnerships, and companies. It then discusses the modern corporation's separation of owners and managers. Finally, it provides a brief tour of the financial environment, including financial markets, flows of funds, types of markets, and influences on expected security returns such as risk.
The document discusses working capital management. It defines working capital as the excess of current assets over current liabilities, representing the funds available to run day-to-day operations. It notes that working capital management involves managing current assets like cash, debtors, and inventory as well as current liabilities like creditors. Proper working capital management is important for business liquidity, profitability, and survival, especially in today's competitive environment. The key steps in working capital management include cash management, debtors management, inventory management, and creditors management.
Manpreet Kaur discusses the differences between profit maximization and wealth maximization as objectives for financial management. [1] Profit maximization aims to increase earnings and is a short-term approach, but it can exploit workers and consumers. [2] Wealth maximization seeks to increase long-term shareholder value by maximizing the current stock price, balancing the interests of various stakeholders. [3] While both have drawbacks, wealth maximization is generally considered a more appropriate objective as it considers the time value of money and risk over the long run.
The document defines leverage as using fixed costs to magnify returns. There are two types of fixed costs: operating costs like rent and salaries, and financial costs like interest from debt. Leverage can increase risk but also returns. There are three types of leverage: operating, financial, and total. Operating leverage is the effect of fixed operating costs on income. Financial leverage is the effect of fixed financing costs like debt and preferred stock on earnings per share. Degree of operating leverage and degree of financial leverage measure the multiplier effect of each type of leverage. Examples using data from a levered company show that a 10% increase in sales would increase operating income by 17.14% due to operating leverage of 1.714, and operating income
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.
Companies can raise capital through either debt or equity financing. Debt financing involves taking a loan that must be repaid with interest, while equity financing involves selling ownership stakes in the company. There are several pros and cons to each approach. Debt is generally easier to obtain but subjects the company to fixed repayment obligations, while equity does not require repayment but dilutes ownership and control of the company. The best financing structure depends on the specific needs and risks involved for each business.
The document discusses international financial statement analysis and the need to analyze non-domestic financial statements due to increasing globalization and cross-border business activities. It covers the importance of understanding different countries' business environments and financial reporting standards when performing international financial analysis. The document also provides an overview of the key components of financial statement analysis, including business strategy analysis, accounting analysis, ratio analysis, and audit reports. It discusses the role of auditors in providing an independent assessment of financial statement reliability across different country reporting requirements.
1. The document discusses ratio analysis and financial analysis. Ratio analysis is a tool that evaluates the financial position and performance of a firm by establishing relationships between financial statement items.
2. Financial analysis identifies the financial strengths and weaknesses of a firm. It is done by analyzing ratios calculated from a firm's balance sheet and income statement. Key ratios include liquidity ratios, profitability ratios, and leverage ratios.
3. Ratio analysis involves comparing a firm's ratios to standards like its own past ratios, competitor ratios, industry averages, and projected ratios. This allows users to evaluate the firm's financial stability, profitability, and efficiency over time.
This document discusses various financial ratios that can be used to analyze the financial performance and health of a company. It provides definitions and formulas for key liquidity ratios like current ratio and quick ratio, leverage ratios like debt-equity ratio, activity ratios like inventory turnover ratio and average collection period, and profitability ratios like gross profit margin ratio. Specific calculations are shown for a company to illustrate how to compute various ratios from the company's financial statements. The document emphasizes the importance of ratio analysis for evaluating a company's performance over time and in comparison to other companies.
The document discusses the role and functions of a finance manager. It defines financial management and outlines key responsibilities of a finance manager, including determining financial needs, selecting sources of funds, conducting financial analysis, establishing an optimal capital structure, planning and controlling profits. The finance manager is responsible for securing adequate funding, investing funds profitably while managing risk, planning future operations, and controlling current performance through financial reporting and budgeting to guide efficient allocation of resources and achieve adequate returns.
Ratio analysis involves calculating and interpreting various financial ratios to evaluate a company's liquidity, solvency, operational efficiency, and profitability. Key ratios include current ratio, quick ratio, debt-to-equity ratio, inventory turnover, gross profit margin, return on equity, and earnings per share. Ratio analysis is used to analyze a company's financial health and performance over time as well as compare it to other companies.
Working capital refers to a company's short-term assets and liabilities. There are two main concepts of working capital - gross working capital, which is the total investment in current assets, and net working capital, which is the difference between current assets and current liabilities. A company's working capital requirements are determined by factors like its nature of business, production cycle, and seasonal needs. There are different approaches to financing working capital, including the hedging approach of matching debt maturities to needs, the conservative approach of financing all current assets with long-term debt, and the aggressive approach of relying more on short-term debt.
Financial Analysis and Types of Financial AnalysisNEETHU S JAYAN
The document discusses financial analysis, which involves critically examining financial statements to understand a firm's financial position and performance. Financial analysis identifies strengths and weaknesses by establishing relationships between balance sheet and income statement items. It has several objectives, including providing reliable financial information to assess a firm's profitability, financial position, and ability to meet obligations. Financial analysis can be conducted internally or externally and has various types depending on the materials used, methodology, entities involved, and time horizon considered. Its limitations include potential to mislead users or make wrong judgments if not done properly.
The document discusses the scope of financial management based on three approaches: traditional, transitional, and modern. It focuses on three major areas that constitute the scope: investment decisions, financial decisions, and dividend decisions. Investment decisions involve selecting long-term and short-term assets, including capital budgeting and working capital management. Financial decisions relate to choosing an optimal capital structure and sources of financing. Dividend decisions balance distributing profits to shareholders versus retaining profits for future business needs.
The document discusses liquidity ratios, which analyze a firm's short-term financial position and ability to meet current liabilities with current assets. It defines the current ratio as current assets divided by current liabilities, with 1.5:1 typically considered satisfactory. The quick or acid test ratio measures a firm's ability to use quick assets like cash to pay current liabilities immediately, excluding inventory from current assets. Both ratios above 1 indicate a company can meet short-term obligations, while ratios below 1 suggest potential issues with liquidity. The document provides an example calculation of both ratios.
The DuPont analysis breaks down return on equity (ROE) into three components: net profit margin, total asset turnover, and financial leverage. This allows companies to identify which specific factors are driving ROE and how they can be improved. The analysis provides a more comprehensive understanding of a company's profitability and valuation than looking at ROE alone. It is useful for comparing competitors and determining whether high ROE is due to sustainable or risky factors.
Financial Statement Analysis: Learn The Best Tricks And Tips!Andrew Li
Learn how to read financial statements and SEC filings like an investing pro!
Also, check out the last 2 pages for an amazing and exclusive discount offer for my Udemy course on financial statement 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.
This document discusses the key concepts of financial management including its meaning, scope, objectives and related disciplines. Financial management aims to maximize shareholder wealth through investment analysis, working capital management, capital structure decisions, and dividend policy. The scope of financial management has evolved from a traditional approach focused on capital markets to a modern approach providing a framework for strategic financial decision-making. The objectives of financial management are typically profit maximization or wealth/shareholder value maximization. A case study on Reliance Industries outlines its strategic vision to reinforce its existing businesses and pursue new opportunities in industries like petroleum, retail, telecommunications and education.
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.
The document discusses various types of ratios used in ratio analysis for evaluating the financial performance and position of a business. It provides definitions and interpretations for liquidity ratios like current ratio and quick ratio, solvency ratios like debt-equity ratio and proprietary ratio, activity ratios like stock turnover ratio and debtor turnover ratio, and profitability ratios like gross profit ratio, net profit ratio, and return on capital employed. Formulas and ideal ratios are given for each type of financial ratio.
This document provides an overview of finance and key concepts. It discusses what finance is, the functions and areas of finance, and compares finance to accounting. It also outlines the goals of business as maximizing shareholder wealth. The document reviews types of businesses including sole proprietorships, partnerships, and companies. It then discusses the modern corporation's separation of owners and managers. Finally, it provides a brief tour of the financial environment, including financial markets, flows of funds, types of markets, and influences on expected security returns such as risk.
The document discusses working capital management. It defines working capital as the excess of current assets over current liabilities, representing the funds available to run day-to-day operations. It notes that working capital management involves managing current assets like cash, debtors, and inventory as well as current liabilities like creditors. Proper working capital management is important for business liquidity, profitability, and survival, especially in today's competitive environment. The key steps in working capital management include cash management, debtors management, inventory management, and creditors management.
Manpreet Kaur discusses the differences between profit maximization and wealth maximization as objectives for financial management. [1] Profit maximization aims to increase earnings and is a short-term approach, but it can exploit workers and consumers. [2] Wealth maximization seeks to increase long-term shareholder value by maximizing the current stock price, balancing the interests of various stakeholders. [3] While both have drawbacks, wealth maximization is generally considered a more appropriate objective as it considers the time value of money and risk over the long run.
The document defines leverage as using fixed costs to magnify returns. There are two types of fixed costs: operating costs like rent and salaries, and financial costs like interest from debt. Leverage can increase risk but also returns. There are three types of leverage: operating, financial, and total. Operating leverage is the effect of fixed operating costs on income. Financial leverage is the effect of fixed financing costs like debt and preferred stock on earnings per share. Degree of operating leverage and degree of financial leverage measure the multiplier effect of each type of leverage. Examples using data from a levered company show that a 10% increase in sales would increase operating income by 17.14% due to operating leverage of 1.714, and operating income
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.
Companies can raise capital through either debt or equity financing. Debt financing involves taking a loan that must be repaid with interest, while equity financing involves selling ownership stakes in the company. There are several pros and cons to each approach. Debt is generally easier to obtain but subjects the company to fixed repayment obligations, while equity does not require repayment but dilutes ownership and control of the company. The best financing structure depends on the specific needs and risks involved for each business.
The document discusses international financial statement analysis and the need to analyze non-domestic financial statements due to increasing globalization and cross-border business activities. It covers the importance of understanding different countries' business environments and financial reporting standards when performing international financial analysis. The document also provides an overview of the key components of financial statement analysis, including business strategy analysis, accounting analysis, ratio analysis, and audit reports. It discusses the role of auditors in providing an independent assessment of financial statement reliability across different country reporting requirements.
1. The document discusses ratio analysis and financial analysis. Ratio analysis is a tool that evaluates the financial position and performance of a firm by establishing relationships between financial statement items.
2. Financial analysis identifies the financial strengths and weaknesses of a firm. It is done by analyzing ratios calculated from a firm's balance sheet and income statement. Key ratios include liquidity ratios, profitability ratios, and leverage ratios.
3. Ratio analysis involves comparing a firm's ratios to standards like its own past ratios, competitor ratios, industry averages, and projected ratios. This allows users to evaluate the firm's financial stability, profitability, and efficiency over time.
The document appears to be a student's project report on financial ratio analysis of Wipro. It includes an acknowledgment section thanking individuals who supported and guided the project. It also includes a declaration by the student stating that the work is original. The project report includes various chapters that will analyze Wipro's financial ratios to assess the company's performance and financial position. It provides an overview of the objectives and methodology that will be used in the ratio analysis.
1. The document is a student's project report on the financial ratio analysis of Wipro. It includes an acknowledgment section thanking various professors and institutions for their support and guidance.
2. There is a declaration by the student stating that the project is their original work and submitted for their Master's degree program.
3. The project contains a certificate from the student's teacher guide confirming they completed the research project on the given topic under their guidance.
11.financial diagnosis of selected listed pharmaceutical companies in bangladeshAlexander Decker
This document summarizes a study on the financial diagnosis of selected listed pharmaceutical companies in Bangladesh from 2006-2007 to 2008-2009. The study uses ratio analysis, statistical tools, and Altman's Z-Score model to analyze the liquidity, profitability, and solvency of the companies. The results found that while the industry average bankruptcy risk was satisfactory, the liquidity, profitability, and solvency positions of most companies were average. Factors like unsound financial management, inadequate working capital, and government policies were found to influence the financial performance. The study aims to identify limitations and recommend corrective measures to improve the industry.
CH (1) - The role of corporate finance .pdfYassinDyab2
This document discusses the role of managerial finance. It defines finance and describes career opportunities in both financial services and managerial finance. It also covers the goal of the firm as maximizing shareholder wealth, legal forms of business organization, and the relationship between managerial finance and economics/accounting. Finally, it addresses corporate governance and agency issues, describing how governance mechanisms and compensation plans aim to align manager and shareholder interests.
The document provides an overview of ratio analysis, including definitions, types of ratios, and how they are used. It discusses the following key points in 3 sentences:
Ratio analysis involves calculating and interpreting financial ratios to evaluate a company's performance and financial position. There are several types of ratios that can be calculated including liquidity ratios, leverage ratios, activity ratios, and profitability ratios. Ratio analysis is a useful tool for managers to evaluate performance over time, compare to competitors, and identify areas for improvement.
This document discusses ratio analysis and provides definitions and classifications of financial ratios. It defines ratio analysis as drawing meaningful understanding from financial statements by analyzing ratios in a user-oriented approach. Ratios measure relationships between financial figures and are classified according to the statement used, function, and type of analysis provided (liquidity, solvency, performance, profitability, market). Common liquidity ratios are discussed as measuring a company's short-term financial obligations and ability to pay off current liabilities.
Finance involves activities like investing, borrowing, lending, saving, budgeting and forecasting. It includes personal finance, corporate finance, and public finance. Finance grew out of economics and accounting, so people in finance need knowledge of those fields. Financial management focuses on decisions about acquiring and managing assets to maximize firm value. It involves investment, financing, and asset management decisions. Capital markets allow buyers and sellers to trade securities like stocks and bonds.
Finance is the lifeblood and lifeline of any business entity either commercial or non-commercial. The
Survival, Stability and Sustainability of a firm is highly associated with its financial wellness. It can be observed through its ability to pay(re) short-term as well as long term liabilities, meeting the regular financial obligations, to increase the value of firm and ability to generate profit. Financial analysis, evaluation, and assessment help in determines the financial position and financial strength of a firm. Among the plenty of methods and tolls available for financial performance, ratio analysis is more useful and meaningful. These ratios make it possible to analyze the evolution of the financial situation of a firm (trend analysis), cross-sectional analysis and comparative analysis.
Ratio analysis involves calculating and analyzing relationships between financial data points to assess the financial position and performance of a company. It is useful for strategic decision making, financial planning, and identifying weak areas of a business. Key types of ratios include profitability, liquidity, activity, and leverage ratios. Profitability ratios measure profit earning capacity, liquidity ratios assess ability to meet short-term obligations, activity ratios evaluate efficient use of assets, and leverage ratios examine ability to meet long-term debt obligations. Ratio analysis is an important financial analysis technique.
This document is a study submitted by K T Phanindra to the Institute of Public Enterprise in partial fulfillment of the requirements for a Post Graduate Diploma in Management. The study examines the impact of liquidity ratios on a company's profitability and performance. It includes an introduction to ratio analysis and its uses and limitations. The study will analyze different types of ratios including debt, liquidity, profitability, cash flow, and market value ratios. It will focus specifically on different debt ratios and how they impact a company's financial performance and profitability. The objectives are to understand the effect of debt ratios on performance and how managers use debt analysis in decision making. Secondary data from company financial statements will be used for the
This document provides guidance on assessing a company's performance using financial statement analysis techniques. It discusses various types of ratios that can be used, including profitability, liquidity, management efficiency, solvency, and investment ratios. It also covers cash flow analysis. Key points include:
- Ratios and cash flows should be analyzed over time and compared to peers to evaluate a company's performance.
- Non-financial factors like the business environment must be considered when assessing performance.
- Multiple ratios across different categories should be examined together rather than in isolation to get a full picture of a company's financial health.
The document discusses key elements of financial statement analysis including the four main financial statements, understanding the industry and company strategies, assessing the quality of financial statements, and analyzing current profitability and risk. It provides examples of various techniques used in financial statement analysis such as horizontal analysis, vertical analysis, common-size analysis, and calculating financial ratios to evaluate liquidity, asset management, debt, and profitability.
The document discusses credit ratings and CRISIL's rating methodology. It provides 3 key points:
1) Credit ratings provide an independent assessment of a company's ability to meet its financial obligations and are used by investors to evaluate risk. Ratings benefit both issuers by improving marketability and investors by supplementing their analysis.
2) CRISIL's rating methodology involves analyzing industry risk, business risk factors like competitive position, and financial risk factors like profitability and cash flows. Management quality is also assessed.
3) The ratings process involves a rating agreement, meetings with management, a rating committee review, communication to the issuer, and public dissemination.
Definition of terms
"Micro business customers" means customers having less investable asset, trading transaction and return from business. They represent the lower class of wholesale banking customer segments of the Bank.
"Wholesale banking" means banking service availed to individual and non- individual business customers, public & institutional customers.
“Agent” means a person contracted by the Bank to facilitate provision of agency banking business service in the name and on behalf of the bank.
“Board” means the supervisory Board of the Bank formed in accordance with Article 10 (2) and 12 of Public Enterprises Proclamation No 25/1992.
“CBEBirr” means a mobile money service owned by CBE that provides services like mobile payment, mobile transfer, and agency banking.
“Credit History” a history of all the pieces of financial information that relates to customer’s life.
“Credit policy” means a general framework approved by the board that spells out and guides the bank’s credit/financing strategic directions and credit /financing decisions.
“Credit Scoring” means judging/evaluating the creditworthiness of a customer based on basic characteristics and past performance in credit and other relationships with Bank.
“Credit” means an arrangement to receive financial services now and pay later.
“Customer” means a person who uses Micro Saving and Lending services.
“Digital Micro Credit” means micro loans that are requested, received and repaid all through mobile phones (or any other appropriate tools) via interaction with a computer system.
“Digital MSL Policy” means a policy document that governs the management of digital micro saving and credit services.
“Financial Transaction” mean an event which involves money or payment, such as deposit money into a bank account, borrow money to customers.
“Fixed Account” means a saving account locked for a certain period, a minimum of three months, based on the preference of the customers to fulfil their designated plan.
“Know Your Customer(KYC)” means performing a set of due diligence measures undertaken by the Bank to identify a user and the motivation behind the financial activities of customers.
“Lending officials” means any person involved in MSL business of customer acquisition, Credit Worthiness evaluation, Credit operation, Collection, monitoring and decision-making as well as write off and post write off follow up process.
“Level Three agents” means agent hierarchically created as agents in CBE Birr System.
“Level Two agent” means an agent hierarchically created as sole agent in CBE Birr System and cannot create an agent. And managing the cash and balance on CBE Birr account liquidity requirements of its own.
“Loan Pricing” means setting the interest rate, fees, commission, and others to be charged by the Bank on loans, advances, and guarantees extended to customers.
“Merchant” means an entity that contract with an acquirer to originate transactions and accepts cards for payment and displaying b
This document provides an overview of managerial finance. It defines finance and describes the goals of the firm and maximizing shareholder wealth. It outlines various career opportunities in finance and legal forms of business organization. It discusses corporate governance and the principal-agent problem between owners and managers. It also describes the managerial finance function and its relationships to economics and accounting. The overall document serves as an introductory chapter on the role and scope of managerial finance.
A framework for business analysis and valuation using financial statements.pdfLiz Adams
This document outlines a framework for analyzing businesses using their financial statements. It discusses how financial reporting plays a critical role in capital markets by providing information to investors and intermediaries. The accounting system summarizes a firm's business activities into financial statements but is also influenced by the firm's accounting strategies and choices. Effective financial statement analysis aims to gain valuable insights about a firm's current performance and future prospects by interpreting financial information in the context of its industry and strategies.
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.
Similar to Presentation finance (FINANCIAL HEALTH) (20)
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How to Setup Warehouse & Location in Odoo 17 InventoryCeline George
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This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
2. Financial HEALTH:
Financial Health is a term used to describe the state of one’s
personal financial situation. There are many dimensions to financial
health, including the amount of savings you have, how much you are
setting away for retirement and how much of your income you are
spending on fixed expenses.
3. Importance of financial health:
Financial health as important as physical health. Money and financial
issues can be significant source of stress for people. This illustrates
the point that those who plan for their financial future tend to feel
better off. It is important that employers acknowledge the
connection between the physical wellbeing of their employees and
financial stress.
4. Components of Financial Health:
• Four Components has defined financial health: Spend, Save,
Borrow, and Plan. These components mirror your daily financial
activities. What you do today in terms of spending, saving,
borrowing, and planning. For example, will you be able to handle
a car breakdown or an extra medical bill? Will you be able to
save for college or go on your dream vacation?
•
5. Indicators of Financial Health:
• Eight Indicators has defined how to become Financially Healthy:
6. Financial health of a company:
A company's bottom line profit margin is the best indicator of
its financial health and long-term viability. To accurately
evaluate the financial health and long-term sustainability of a
company, a number of financial metrics must be considered.
Four main areas of financial health that should be examined
are liquidity, solvency, profitability and operating efficiency.
7. 1) liquidity:
• Liquidity is a key factor in assessing a company's basic
financial health. Liquidity is the amount of cash and easily-
convertible-to-cash assets a company owns to manage its
short-term debt obligations. Before a company can prosper
in the long term, it must first be able to survive in the short
term. The two most common metrics used to measure
liquidity are the current ratio and the quick ratio.
•
8. 2) solvency:
• Closely related to liquidity is the concept of solvency, a
company's ability to meet its debt obligations on an
ongoing basis, not just over the short term. The debt-to-
equity (D/E) ratio is generally a solid indicator of a
company's long-term sustainability, because it provides a
measurement of debt against stockholders' equity, and is
therefore also a measure of investor interest and
confidence in a company.
9. 3) operating efficiency:
• A company's operating efficiency is key to its financial
success. Operating margin is the best indicator of its
operating efficiency. This metric indicates not only a
company's basic operational profit margin after deducting
the variable costs of producing and marketing the
company's products or services; it thereby provides an
indication of how well the company's management controls
costs.
•
10. 4) profitability:
• While liquidity, basic solvency and operating efficiency are all
important factors to consider in evaluating a company, the
bottom line remains a company's bottom line: its net
profitability. The best metric for evaluating profitability is net
margin, the ratio of profits to total revenues. A larger net
margin, means a greater margin of financial safety.
11. Financial risk of a company:
Risk is inherent in any business enterprise, and good risk
management is an essential aspect of running a successful
business. Sometimes, the best a company can do is try to
anticipate possible risks, assess the potential impact on the
company's business and be prepared with a plan to react to
adverse events. Financial risk categorize into four broad
categories: market risk, credit risk, liquidity risk and operational
risk.
•
12. 1) Credit risk:
• Credit risk is the risk businesses incur by extending credit to
customers. It can also refer to the company's own credit
risk with suppliers. A company must handle its own credit
obligations by ensuring that it always has sufficient cash
flow to pay its accounts payable bills.
13. 2) Market risk:
• Market risk is the possibility of an investors experiencing losses
due to factors that affect the overall performance of the
financial markets in which he or she is involved. Market risk, also
called ‘’systematic risk’’, cannot be eliminated through
diversification.
14. 3) Liquidity risk:
• Liquidity risk includes asset liquidity and operational funding liquidity
risk. Asset liquidity refers to the relative ease with which a company
can convert its assets into cash should there be a sudden,
substantial need for additional cash flow. Operational funding liquidity
is a reference to daily cash flow. General or seasonal downturns in
revenue can present a substantial risk if the company suddenly finds
itself without enough cash on hand to pay the basic expenses
necessary to continue functioning as a business.
•
15. 4) operational risk:
• Operational risks refer to the various risks that can arise from
a company's ordinary business activities. The operational
risk category includes lawsuits, fraud risk, personnel
problems and business model risk, which is the risk that a
company's models of marketing and growth plans may
prove to be inaccurate.
•
16. • JOURNAL TITLE: Financial health and management
practices
•
• YEAR OF PUBLICATION: 2018
•
• PUBLISHED IN: JOURNAL OF FINANCIAL CRIME
•
• AUTHORS: Shamimul Hasan, Normah Omar, Rashedul Hassan
•
•
17. • The purpose of this study is to examine the relationship between
financial strength or condition and managerial practices in
preparing financial statements of public limited companies. The
objectives of this study are threefold – to measure the financial
strength, to measure integrity index and to examine the
relationship between management practices and financial
strength.
•
•
Abstract:
18. • Financial ratios, Altman’s Z-Score, integrity index, ranking
approach and chi-square test are used to achieve the objectives.
A multi-year cross-country analysis is done by considering
sample of seven Asian countries, namely, Malaysia, Singapore,
Thailand, Indonesia, Hong Kong, China and Japan.
•
Design/methodology/approach:
19. FINDINGS:
• The study catches the relationship between management practices and
financial strength across sample countries. Management practices is
one of the responsible factors for this relationship. They use
discretionary power in preparing financial statements to control the
trading results. The principles of accounting do not support the
alteration of financial data to look the company better on paper. The
cost of financial statement fraud is higher than other occupational
fraud.
•
•
20. Research limitations/implications:
•
• This study does not cover factors other than management
practices and further study could be conducted to look for the
other reasons that may also responsible for the deviations.
•
•
21. • Practical implications:
• Conflict of interest between shareholders and board of directors is not a new
phenomenon. Auditing system is introduced to minimize this conflict of
interest, but they failed to uphold their position in reality. Management
also needs to prove their integrity in financial statements. Ethical
consideration is the highest priority.
• Social implications:
• Stakeholders, especially regulators, professional bodies and academics,
should concentrate on the issue on ‘how to reduce the manipulation in
financial statements’ to create a safe investments avenue for the nation.
•
•
22. Introduction:
• Financial statement (FS) could be compared with a mirror through which
operating performance, financial performance and financial health of a
company are seen. It is a key document to the users’ of FS, such as
shareholders, creditors, potential investors, fraud examiners, financial
analysts, bankers, regulators, market operators, competitors,
academicians, researchers, reporters and other interested parties. It is
used as a primary source of financial information and considered as
authentic document too.
•
•
23. HYPOTHESIS:
• H1. There is a significant relationship between management
practices and financial strength across companies over the years.
• H2. There is a significant relationship between management
practices and financial strength across countries.
•
24. Research frame work:•
• The following model (Figure 1) depicted that the data from FS are used to measure financial
strength using Z-Score (ZS). The company’s financial strength could be categorized into
three group – Strong (Safe), Weak (Grey) and Poor (distress) based on Z-Score. Higher Z-
Score companies’ (strong) integrity of presenting FS is better than the lower Z-Score
companies as past studies shows that there is a link between low Z-Score and the
engagement of the company having it in the earnings management practices (Ahn and
Choi, 2009; Zang, 2012). On the basis of integrity index (II), ranking (RK) is established in
two ways – across companies over the years (OY) and across sample countries (AC) in Asia.
Then, the relationship between management practices (MP) and financial strength across
companies Health and management practices over the years (H1) as well as the
relationship between management practices and financial strength across countries (H2)
are tested using statistical tool – Chi-square (X2 ).
•
25. Method and sample:
•
• Simple random sampling technique of probabilistic method of sampling is
used to select the sample for this study. In all, 100 companies were
randomly selected from national stock exchanges of seven countries from
Asia, namely, Malaysia, Indonesia, Thailand, Hong Kong, Singapore, China
and Japan. This study adopts Altman’s Z-Score model (Altman and Lafleur,
1984) . Z-Score is a liquidity measure and proximity to the state of
bankruptcy of a company. As a liquidity measure, it can be viewed as
directly connected with the corporate earnings (Pustylnick, 2015). Financial
health or strength of a company can be assessed by its Z-Score such as Z >
2.67 = “Strong”, 1.81 < Z < 2.67 = “Weak” and Z < 1.81 = “Poor”.
•
•
26. Results and discussion :
• The results of financial strength of the sample companies across countries are
shown in Table I. It shows observed frequency based on Altman’s Z-Score for each country
(presented horizontally) and for Asia (presented vertically). The companies which are in
“Strong” group are financially much healthier than the “Weak” and “Poor” groups. The
highest number of companies (428 of 600) from Indonesia and the lowest number of
companies (176 of 600) from Malaysia are in strong group. It could be said the majority of
sample companies from Malaysia are suffering from liquidity crisis compared to other
sample countries in Asia.
•
27. • The results of integrity index are presented in Table II. It shows integrity index
over the years, overall integrity index and ranking position based on overall
integrity index of sample countries. The trend of integrity in presenting FS
across countries over the years is increasing and overall integrity index (OII)
is 48 per cent. It indicates that more than 50 per cent, that is, 52 per cent
companies are involved in manipulation of FS.
•
28. The results of testing the relationship between financial strength and management practices across companies over the years
(H1) and across countries (H2) are presented in Table III. It shows mixed results about the relationship between management
practices and financial strength across companies over the years. For Thailand, Japan, Malaysia and Singapore, H1 is rejected.
It indicates that there is no statistically significant relationship between management practices and financial strength. The
result of testing the relationship between management practices and financial strength across countries (H2) is also
presented in Table III. The hypothesis is accepted signaling that the deviations from expected frequency is because of some
other factors not the chance only account for it. The other possible factors might be use of discretionary power, poor
corporate governance, lack of corporate ethical culture, poor leadership qualities, lack of entrepreneurship orientation, poor
internal control, collusion between managers and directors, poor monitoring activities of the board, lack of auditor’s integrity,
collusion between managers and auditors and so on
29. CONCLUSION
•
• The financial strength of a company is an important component to predict
FSF(Financial statements frauds). Financially healthy companies do not
require to manipulate in FS and the manager of these companies maintains
integrity while preparing FS. On the other hand, financially distressed
companies cannot meet the expectation of other groups and they need to
manipulate in FS to fulfill the expectations of stakeholders. Therefore, the
integrity of management depends upon their financial condition. The
results of association between managerial practice in preparing FS and
financial health do not guarantee about the relationship, as it may be true
and may not be true in different setting. This study caught a significant
influence of managers on preparing FS.
•
30. • JOURNAL TITLE: Management Of Pension Discount Rate And
• Financial Health
•
• YEAR OF PUBLICATION: 2016
•
• PUBLISHED IN: Journal of Financial Economic Policy
•
• AUTHORS: Paula Diana Parker, Nancy J.Swanson, Michael
• T.Daugan
•
•
•
31. Abstract:
• Purpose: The aim of this article to examine the unexpected
portion of the pension discount rate to determine if the pension
discount rate is being used to manage earning for both
financially healthy and financially unhealthy firms as categorized
based upon their Altman Z-score bankruptcy.
•
32. • Research Design/ Methodology: Regression analysis
is conducted with the unexpected portion of the
pension discount rate as the dependent variable and
various metrics indicating potential firm strengths and
weakness as the independent variables.
• Findings: This study finds evidence that suggest
managers for both groups of firms are using their choice
of discount rate to manage bottom line earnings.
•
33. • Originality/ Values: Three streams of literature are
considered in this research: earnings management,
defined pension plan and Z-score bankruptcy.
• Key words: Pension funds, Accounting and Auditing,
Firm behavior.
• Paper type: Research paper
•
34. Introduction:
• Earnings management in the context of defined benefit
pension plan accounting as discussed in this paper is a
complex issue whereby a firm manager may seek to
Manipulatefinancialinformationwithoutregardfortheund
erlyingeconomiccondition of the firm’s defined benefit
pension plan
35. Introduction:
• Some of the most important pension assumptions and estimates
are based on the three pension rates that are required to be
disclosed in financial statements. These rates are the discount
rate, the compensation rate and the expected rate of return on
pension plan assets. The objective of our study is to examine
the relationship between the unexpected portion of the
discount rate and the economic determinants of accounting
choice considering the financial strength of firms.
36. Literature Review:
• The earnings management literature is so extensive that it is not feasible to
provide a comprehensive discussion. However, in accordance with positive
accounting theory many research studies attempt to explain accounting
choice by managers using combinations of sets of variables representing
three well-known hypotheses, which include the bonus plan hypothesis, the
debt/equity hypothesis and the political cost hypothesis. This area of
accounting research is well developed and widely accepted.
37. Literature Review:
• Earnings management studies to use the aggregate accruals method. The
advantage of this method is that it simultaneously considers the multiple
choices of managers or at least the aggregate outcomes of the multiple
choices made by manager. The disadvantages of this method Include its
limitation in detecting earnings management and its limitation in addressing
the portfolio of accounting choices made by managers. In addition, the
aggregate Accruals studies often lag both theories to manage accruals and
institutional knowledge of how accruals behave
38. Hypotheses Development:
• The unexpected portion of the discount rate is positively related to the funding ratio (i.e.
FundStat).
• The unexpected portion of the discount rate is positively associated with leverage (i.e. Lev).
• The unexpected portion of the discount rate is negatively associated with firm interest
coverage (i.e. IntCov).
• The unexpected portion of the discount rate is negatively associated with firm size (i.e. Size).
• The unexpected portion of the discount rate is negatively associated with auditor quality (i.e.
AQ).
•
39. Hypotheses Development:
• The unexpected portion of the discount rate is positively associated with the relative size
of the pension plan (PlanRelSize).
• The unexpected portion of the discount rate is negatively associated with market value of
equity to book value of equity (i.e. MVBV).
• The unexpected portion of the discount rate is negatively associated with working capital
(i.e. WC) which is the current asset ratio.
• The unexpected portion of the discount rate is positively associated with the stock
compensation bonus plans (i.e. StkComp).
• The unexpected portion of the discount rate is negatively associated with the auditor
opinion type (i.e. Opin).
•
40. Research Method:
• The primary objectives of earnings management research are to discover how
managers
manipulateearnings,todeterminewhatmotivatesmanagerstomanipulateearningsan
dto evaluate what costs and benefits are associated with manager manipulation.
However, no perfectly complete and precise model exits for measuring and
evaluating earnings management. In fact, the interpretations of evidence from the
earnings management literature are controversial in many instance, including
those related to pension accounting.
42. Conclusion:
• The value of R^2= 0.0813
• The value of adjusted R^2= 0.0740
• The Altman Z-score is a predictive quantitative model developed
in 1968 by Professor Edward Altman to predict bankruptcy by
using a combination of traditional financial ratios and a
statistical method known as multiple discriminant analysis.
•