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    Financial Statement Analysis

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    Arohi
    Financial statement analysis is the process of analyzing a company's financial statements to determine its financial strengths and weaknesses. It is used by management, financial institutions, investors, government, and stock exchanges. The main advantages are measuring short-term and long-term solvency, operating efficiency, and profitability. Common techniques include comparative statements, trend analysis, common size statements, fund flow statements, cash flow analysis, and ratio analysis. Ratio analysis uses ratios to examine relationships between financial data and can be classified into liquidity, profitability, solvency, and turnover/activity ratios.

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    Financial Statement Analysis

    Uploaded by

    Arohi
    13 views12 pages
    Financial statement analysis is the process of analyzing a company's financial statements to determine its financial strengths and weaknesses. It is used by management, financial institutions, investors, government, and stock exchanges. The main advantages are measuring short-term and long-term solvency, operating efficiency, and profitability. Common techniques include comparative statements, trend analysis, common size statements, fund flow statements, cash flow analysis, and ratio analysis. Ratio analysis uses ratios to examine relationships between financial data and can be classified into liquidity, profitability, solvency, and turnover/activity ratios.

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    FINANCIAL STATEMENT ANALYSIS.pptx

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    Financial statement analysis is the process of analyzing a company's financial statements to determine its financial strengths and weaknesses. It is used by management, financial institutions, investors, government, and stock exchanges. The main advantages are measuring short-term and long-term solvency, operating efficiency, and profitability. Common techniques include comparative statements, trend analysis, common size statements, fund flow statements, cash flow analysis, and ratio analysis. Ratio analysis uses ratios to examine relationships between financial data and can be classified into liquidity, profitability, solvency, and turnover/activity ratios.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    13 views12 pages

    Financial Statement Analysis

    Uploaded by

    Arohi
    Financial statement analysis is the process of analyzing a company's financial statements to determine its financial strengths and weaknesses. It is used by management, financial institutions, investors, government, and stock exchanges. The main advantages are measuring short-term and long-term solvency, operating efficiency, and profitability. Common techniques include comparative statements, trend analysis, common size statements, fund flow statements, cash flow analysis, and ratio analysis. Ratio analysis uses ratios to examine relationships between financial data and can be classified into liquidity, profitability, solvency, and turnover/activity ratios.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    FINANCIAL

    STATEMENT
    ANALYSIS
    MEANING
     Analysis of financial statement is a process of
    determined the significant operating and financial
    characteristics of firm from accounting data
    Parties interested in
    financial statement analysis
     Management
     Financial institution including bank
     Investors
     Government
     Stock exchange
    Advantage
     Measuring short term solvency

     Measuring long term solvency

     Measuring operating efficiency

     Measuring profitability

     Forecasting , budgeting and deciding future line of action


    Techniques of financial
    analysis
     Comparative financial statement

     Trend analysis

     Common size financial statement

     Fund flow statement

     Cash flow analysis

     Ratio analysis
    Ratio analysis

     A ratio is a mathematical number calculated as a reference to relationship of two or

    more numbers and can be expressed as a fraction, proportion, percentage and a

    number of times.
    Classification of ratio
    Ratios

    Turnover/ activity
    Liquidity ratios Profitability ratios Solvency ratios
    ratios

    Gross profit ratio Stock turn over ratio


    Current ratio Net profit ratio Debt equity ratio Debtors turnover
    ratio
    Quick ratio Operation profit ratio Capital gearing ratio
    Creditors turnover
    Operating ratio ratio
    Liquidity ratios
    Current ratio Quick or Liquid Ratio

     Current ratio =
     Quick ratio=
     Idle ratio = 2:1
     Idle ratio = 1:1
     Current assets = cash , B/R, stock ,short-
    term investment, debtors, prepaid expenses  = current assets – stock –prepaid exp
    and accrued income
     Current liabilities = Bank overdraft , B/P ,
    creditors , provision for tax and outstanding
    exp.
    Calculate Current Ratio & quick ratio from the following information:

    Particulars (Rs.)
    Inventories 50,000
    Trade receivables 50,000
    Advance tax 4,000
    Cash and cash equivalents 30,000
    Trade payables 1,00,000
    Short-term borrowings (bank overdraft) 4,000

    X Ltd., has a current ratio of 3.5:1 and quick ratio of 2:1. If excess of current
    assets over quick assets represented by inventories is Rs. 24,000, calculate
    current assets and current liabilities.
    Profitability ratios
    Ratio formula

    Gross profit ratio

    Net profit ratio

    Operating profit ratio

    Operating ratio
    Income statement
    Particular Amount
    Net sale ( total sale- sales return) ……….
    Less : cost of goods sold (opening stock + purchase+ direct exp- closing stock ) ……….
    Gross profit ……….
    Less operating exp:
    (a) Office exp:
    ………. ……….
    (b) Selling exp:
    ………..
    Operating profit ……….
    Less : non operating exp ……….
    Add : non operating income ……….
    Net profit ……….

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