Group 7 FINANCIAL ANALYSIS & ACCOUNTING Techno

FINANCIAL
ANALYSIS
FINANCIAL ANALYSIS
It is the process of assessing the performance
and suitability of enterprises, projects,
budgets, and other financial activities. Financial
analysis is commonly used to determine
whether an entity is stable, solvent, liquid, or
profitable enough to merit monetary investment.
BASIC
TYPES OF FINANCIAL ANALYSIS
FUNDAMENTAL TECHNICAL
ANALYSIS ANALYSIS
Fundamental analysis determines Technical analysis implies that a
a security's fundamental worth security's worth is already defined
using ratios and financial by its price and instead focuses
statement data. on price patterns over time.
• HORIZONTAL ANALYSIS
• VERTICAL ANALYSIS
TYPES OF • LIQUIDITY ANALYSIS
• PROBABILITY ANALYSIS
FINANCIAL • MULTI-COMPANY
COMPARISON
ANALYSIS • INDUSTRY COMPARISON
• VALUATION ANALYSIS
THE
FRAMEWORK
INCOMEANALYSIS
BALANCESHEET
OF FINANCIAL
CASHFLOWSTATEMENT
ANALYSIS
✓ INCOME STATEMENT
✓ BALANCE SHEET
✓ CASH FLOW STATEMENT
✓INCOME STATEMENT
An income statement summarizes a
company's financial performance over a
specific time period and demonstrates its
profitability. It can be used to forecast future
performance and estimate future cash flow
potential. This is also known as the profit and
loss statement (P&L), statement of
operations, or statement of earnings.
IMPORTANT
ANALYSIS RATIOS TO
COMPUTE WHEN
REVIEWING INCOME
STATEMENT
GROSS PROFIT MARGIN is the
percentage of revenue remaining
after deducting y our cost of
goods sold. This is calculated by
OPERATING PROFIT MARGIN
dividing gross profit by revenue
indicates the amount of revenue
from sales.
left after C O G S and operating
expenses are considered. The
GPM = Gross Profit ÷ Revenue from
formula for calculating operating
sales
margin is operating earnings
divided by revenue.
OPM = Operating Earnings ÷ Revenue

NET PROFIT MARGIN is the
percentage of revenue after all
expenses have been deducted from
sales, and it indicates how much
profit a business can make from its REVENUE GROWTH is the percentage
total sales. Net profit divided by of growth during a given time period.
revenue gives you the net profit To calculate this, subtract last
margin. period’s revenue from the revenue
this period, and then divide by last
period’s revenue.
NPM = Net Profit ÷ Revenue
RG (%) = (Revenue from Current Period –

Revenue from Previous Period) ÷ Revenue
from Previous Period
REVENUE CONCENTRATION tells
you which clients are generating the
most revenue. Take the revenue
from a single client divided by total
revenue. To mitigate risk, a single REVENUE PER EMPLOYEE can
client shouldn’t generate the bulk of measure business productivity and
your revenue. determine the optimal amount of
employees you need. Take your
RC (%) = Revenue from one client ÷ revenue divided by the number of
Total Revenue employees to gauge how much
revenue a single employee is bringing in.
RpE = Revenue ÷ Number of Employees
BALANCE SHEET
BALANCE SHEET
A bal ance sheet s u m m a r i z e s the assets,
liabilities, and shareholder equity of a
corporation at a certain point in time. The total
o f y o u r asse t s m u s t e q u a l t he total o f y o u r
liabilities and equity on every balance sheet,
which means the dollar amount must be zero.
Your balance sheet can show you how efficiently
you generate revenue and how quickly you sell
items.
CASH FLOW Assets = (Liabilities + Equity)
STATEMENT
CASH FLOW
STATEMENT
A cash flow statement reports the amount
of m o n e y generated over a specific time
period. Its purpose is to provide information
about a company's current liquidity and
solvency, as well as its ability to adjust cash
flows in the future.
THREE MAIN
• CASH FLOW FROM
COMPONENTS OPERATIONS
OF A CASH • CASH FLOW FROM
INVESTING
FLOW • CASH FLOW FROM FINANCE
STATEMENT
ACCOUNTING
ACCOUNTING
Accounting provides a comprehensive
picture of your financial situation. It shows
you whether or not you're profitable, what
your cash flow is, the current worth of your
company's assets and liabilities, and which
areas of your firm are genuinely profitable.
ATTRIBUTES
OF
ACCOUNTING
RECORDING
• RECORDING
• CLASSIFYING
• SUMMARIZING
• INTERPRETING
CLASSIFYING
SIX MAJOR STEPS
IN ACCOUNTING
ANALYZE AND DOCUMENT AT THE END OF THE
TRANSACTIONS QUARTER, PREPARE
ADJUSTING ENTRIES
JOURNAL ENTRIES
SHOULD BE POSTED TO CREATE A TRIAL BALANCE
THE LEDGER THAT HAS BEEN ALTERED
CREATE A TRIAL BALANCE PREPARE FINANCIAL
THAT IS UNADJUSTED REPORTS
TYPES OF
ACCOUNTING
• FINANCIAL ACCOUNTING
• MANAGERIAL ACCOUNTING
• TAX ACCOUNTING
• COST ACCOUNTING
• CREDIT ACCOUNTING
PEOPLE WHO USES
FINANCIAL
ACCOUNTING
1. SHAREHOLDERS OR 5. REGULATORS
INVESTORS
6. UNIONS
2. LEADERS OR
CREDITORS 7. BROKERS AND
ANALYSTS
3. CUSTOMERS
8. MEDIA
4. SUPPLIERS
ACCOUNTANT
A
C
C A qualified accountant will save you time by
explaining your company's financial status
O
They can also supply you with expertise and
U insight that non-accountants just do not have.
N Tax breaks you didn't realize you were eligible for,
T tax rules you didn't know you were breaching,
and best practices learned while working for
A other companies in your field.
N
T
WHY ACCOUNTING
MATTERS FOR YOUR
SMALL BUSINESS?
1. ACCOUNTING HELPS 3. YOU NEED ACCOUNTING

YOU PLAN FOR GROWTH TO GET INVESTORS OR
SELL YOUR BUSINESS
2. ACCOUNTING IS
ESSENTIAL FOR 4. ACCOUNTING HELPS
SECURING A LOAN YOU GET PAID
SIGNIFICANCE OF FINANCIAL ANALYSIS
AND ACCOUNTING IN BUSINESS
Financial research and accounting are critical
components in growing your organization. You can
know the earnings and losses that you've
accumulated over time if you have solid liquidation
and keep track of your money. It can also provide a
clearer direction for what you should accomplish in
order to learn more and broaden your knowledge of
the present economy's methods.
THANK YOU!
PRESENTED BY:
GROUP 7

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FINANCIAL

OPM = Operating Earnings ÷ Revenue

RG (%) = (Revenue from Current Period –

RpE = Revenue ÷ Number of Employees

1. ACCOUNTING HELPS 3. YOU NEED ACCOUNTING

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