Financial Statement Analysis: A Comprehensive Guide
Objective of Edo. Financial:
aims to provide inf. Useful for decision making, optimize the appropriate use of resources and provide elem. Reliable trial to evaluate the economic behavior of an entity.
Solvency:
also called financial stability. It is the fundamental part of a financial analysis.
Likidez:
likidez sig also solvency (cash, banks). Investment over the short to medium term.
Operating efficiency is measured x their level of production, are profits.
Financial Risk:
ke assess the possibility of an event occurring in the future ke change the current or anticipated circumstances ke served basis in the cuantifikcion in monetary terms of assets and liabilities, ke losses or profits may okcionar the economic entity.
Profitability:
Net income values or changes in net assets of the entity in relation to their income, equity, assets and accounting own assets.
Inf ke presents and provides:
·
Financial situation at a particular date
·
Act Operational (asset situation Edo. D)
Cash Flow
· Revelations on politicascontables, environment and viability as a going concern.
Limitations of edo. Financial:
l process is limited by econ. Of the company, had to run for dterminar ke rationality of edo. Financial constraints within their sig: 1.No reflects many factors insidenen ke econ conditions. Finance Company. Inf 2.No present the complete, ie if they are accompanied by their respective account analysis. 3.No ke reflect the inflation rate can determined the outcome econ see the company in a specified period.
Requirements should include the edo k. Financial:
Truth: Specifies ke balances reflected in the balance sheet or losing status and earnings are truthful and accurate.
Normatividad:
ke explik balnca sales and other states are ordered according to accepted accounting standards gralment.
Comparability;:
feasible compare between exercises of the same company and from various companies.
Integrity includes all data necessary to ke its objectives are achieved.
Impartiality:
prepared according to the rules and principles of accounting gralmente accepted.
Gral Balance:
designed, comparative consolidated estimate, budget and public sector.
Financial Statements:
ke are documents provide regular reports to specific dates on the status or development of admon. In a company, ie the inf. Necessary for making a company decidiones.
Gral Balance:
accounting Documet ke reflects the financial situation of an economic entity either public or private organization to a specific date ke permit a comparative analysis of it, including the active , liabilities and equity. The methods of presentation of the balance gral are presenting different accounts ke integrates balance can be performed according to their increasing order and / or decreasing likidez.
The method is growingwhen there are more first likidez assets or availability, then the other accounts in order of importance. Balance is said sta ke classified in order of decreasing likidez and liability when the assets were presented first and then observing the activities undertaken or currents.
Edo. Outcome or profit and losing:
ke accounting document shows the results of operations (utility, losing remanent and exedente) of an entity during a given period. It first determines the income and expenses and as a result we determine the gross profit or loss.
Edo exchange of financial position or cash flow:
application of the cash flow statement affects all businesses, will allow assessment of changes in equity of the company, economically-financial structure and its ability to include in the amounts and the appropriateness of cash flow in order to adapt to changing circumstances and opportunities.
· Cash flow is the movement of income and expenses to a certain date. It immediately.
Cash Flow · inputs and outputs are subject to availability of resources with regard ke d the company is short-term way.
· Net cash flow is the difference between net income and net disbursements, discounted to the date of approval of an investment project to date present value technique, this sig take into account the value of money in terms of time.
Edo Balance sheet:
shows in detail the contributions of members and the distribution of profits earned in one period, besides the application of retained earnings in periods shown separately anteriores.Este the assets of a company.
Classification methods of analysis:
methods d considran as financial analysis used to simplify procedures, remove or reduce the narrative and numerical data that comprise the financial statements in order to measure the relations in one period and changes in several accounting periods presented.
to meet the financial analysis ai ke Discovered their profits generated ke yield assets placed in operation.
Your cup of performance:
the percentage d value in a given period and its likidez:
the ability empressa ke has to pay its debts time.
According to the method of analyzing the content of the financial statements are the signs assessment methods: vertical or 1.Metodo d static analysis: is used to analyze financial statements for the same period and the balance gral and edo.
Simple reasons
It’s called reason the relationship between two quantities of the same species ..
Classification of static reasons why:
are akellos indikn ke ai quantitative relationship between BSI edo gral or situation. Of financial position.
Dynamic reasons: they are the ke exporesan the quantitative items edo. Outcome.
Reasons static-dynamic:
showing the quantitative balance edo gral and outcome.
.
Relations will be when there are sig unik and dependence relations between quantities selected.
The static and dynamic reasons can trace the history of a company and evaluate your current situation, permit also to train the company’s financial responsibility to provide feedback from investors and creditors.
The interpretations derived from the static-dynamic reasons offer greater difficulty due to it shows as a value to a certain date, a dynamic metric amounts accumulated during certain points periodo.Estas figures when compared with each other to produce a ratio relative validity
Liquidity ratios .-
That a liquid asset is one that can easily turn into cash at a fair market value and liquidity position of the firm is defined as the ability to meet its obligations in circulation (liabilities).
REASONS CIRCULANES
ASSETS RC = = 1000 = 3.2 TIMES
LIABILITIES
The short-term debts are guaranteed by all values of assets such values are readily available or it will become short term. The ratio expresses the · of times current assets to, or in another form, weights and currencies that have to cover each dollar of debt in circulation.
CIRCULNTE OR REASON ACID TEST
RC = AC-INV = 1000-615 = 1.2 TIMES
PC 310
He believes that all assets except inventories are subject to a guaranteed performance more difficult short-term liabilities. Is the liquidity or ability to pay immediately the company.
INVENTORIES TURNOVER
RI = TN / INV. 3000 / 615 = 4.8 TIMES
The resulting quotient times indicate the num ke inventories have been sold in the period of analysis. A very slow rotation (very low) may indicate ke problems in the market, investment in inventories due to the volume of Vtas in the period, or a decrease in Vtas, a rotation is favorable to the company and shows efficiency in sales, also allows the rapid conversion of assets into new act.Circulantes and utilities.
X ROTATION OF ACCOUNTS RECEIVABLE
RC * C = C * C (sales / 360 days) = 375 (3000/360) = 45 DAYS
The result reflects the average num of days in the company ke take to get the cash ke ke likidan customers their accounts, is the average collection period these days can be compared against the terms under which the company sells its products (purchasing policies ).
ROTATION OF FIXED ASSETS
RAF = sales / AFNET
Ahem = 3000/1000 = 3.0 times
(It is the result of dividing sales between the net fixed assets)
It measures how effectively the firm uses its plant and equipment, if the resulting quotient is high, the operation means that the company is using its assets with intensity. A potential problem may occur when this ratio is used to compare different companies. This is because assets are reflected in the accounts at their historical value and to compare one company with another probably oldest first rotation showed a higher fixed assets.
ROTATION OF TOTAL ASSETS
RAT = VTAS / TOTAL ASSETS
= 3000/2000 = 1.5 times
Measures the ability to generate transactions (sales), business investment given the total assets of the same, a comparison between companies in the same sector may suggest an insufficient number of operations that should lead the company to increase its level of sales, dispose of some assets or perform a combination of both.
REASONS FOR DEBT MANAGEMENT (LEVERAGE)
The extent to which a company uses debt financing or through its financial leverage, has 3 very serious implications:
a) By raising funds through debt, the shareholders can maintain control of a company with an own limited investment.
b) Creditors provide the equity or funds provided by the owners to have a safety margin so that when shareholders have provided only part of total financing, risks of the enterprise is primarily its creditors.
c) If the company gets a better return on investments financed with loan funds requested that the interest paid on the same return on owners’ capital is increased or leveraged.
RATIO OF TOTAL DEBT TO TOTAL ASSETS
Is calculated by dividing total debt (total liabilities) between the total assets of the company.
= VDR / AT
EJ = (310 +754) / 2000 = 53.2%
It measures the percentage of funds provided by creditors. Total debt includes both current liabilities and long-term liabilities. Creditors prefer a low debt ratio, by, the lower is the reason, the greater the protection against losses from creditors in a liquidation. Moreover, owners can benefit from this leverage by increasing earnings. In this case demonstrates that creditors have provided more than 50% of total company funding.
ROTATION OF INTEREST TO UTILITIES
This ratio is computed by dividing earnings before interest and tax over total interest.
ROTATION UTIL.ANTES ISR / INTERESTS
EJ = 283.80 = 3.2 TIMES
This ratio measures the extent to which operating income can decline before the firm to make them unable to meet its annual interest costs. Failure to meet this obligation may trigger legal action by creditors of the company, which probably would result in its bankruptcy.
REASON TOTAL LIABILITIES TO EQUITY
Is calculated by dividing total liabilities from equity
PT / DC
= 1064/936 = 1.13 pesos
This ratio shows the coverage of capital or shareholder for each dollar financed by foreign creditors.
Method of horizontal analysis. C onsiste financial statements to compare two or more homogeneous in consecutive periods to determine increases and decreases or changes in the accounts from one period to another.
Importance:
by reporting whether changes in the activities and the results are positive and negative.
Define which deserve more attention.
This procedure is dynamic. Shows variations in absolute numbers, percentages or reasons.