Financial Ratio Analysis: Understanding Key Performance Indicators
Financial Ratio Analysis
Financial ratios are used to evaluate a company’s performance across several key areas:
- Liquidity: Measures the company’s ability to meet its short-term obligations.
- Management (Activity): Measures the efficiency of asset utilization and turnover.
- Debt (Leverage): Relates resources and commitments, indicating the level of financial risk.
- Profitability: Measures the company’s ability to generate wealth.
Liquidity Ratios
(1) Overall Liquidity:
A ratio of 2.72 indicates that current
Read MoreUnderstanding Key Accounting Terms: Cash, Receivables, and Inventory
Understanding Key Accounting Terms
Cash and Cash Management
Availability: Those assets of the entity that stand out for their immediate liquidity, i.e., they are means of payment.
Cash (Box): Used to record the movement of funds done with paper money or currency in circulation or current checks. The use of this account depends on the level of the company:
- Small business: cash payments made and deposited in banks.
- Medium and large companies: the cash is deposited in the bank, and check payments are made.
Understanding Public Spending, GDP, and Price Indices
Public spending includes all expenditures of the public sector intended to pay the payroll of its employees plus the costs of goods and services purchased by the sector. This should not be confused with the private sector.
National accounts measure public expenditure in the Government’s budget. Net exports are also important. To obtain an accurate measurement of GDP, we must add that part of Spanish production acquired by foreigners (total exports) and subtract the purchase of Spanish goods produced
Read MoreUnderstanding Taxes, Money, and Economic Systems
Taxes: An Overview
Taxes: A tax is a payment demanded by public administrations without direct compensation to the taxpayer.
Types of Taxes
- Direct Tax: Levied directly on people and companies based on income or ownership of goods.
- Indirect Tax: Levied on the consumption or use of goods.
Specific Tax Examples
- IRPF (Personal Income Tax): Tax levied on individual income from work and capital.
- IS (Corporate Tax): Paid by companies on profits, proportional to the benefit obtained.
- IVA (VAT – Value Added Tax)
Key Concepts in Banking and Finance
Trends in Banking
- Balance Sheet Efficiency: Ramp up customer relationship programs, increase cross-selling efforts, invest in product lines that attract stable deposits.
- M&A: View targets with a focus on efficiencies, growth factors, funding profile, technology, compliance.
- Growth: Investing in customer analytics, leveraging digital technologies, determine and implement prudent underwriting standards.
- Compliance and Risk Management: Incorporate risk management into performance management programs
Understanding the Spanish Welfare State and Macroeconomics
The Spanish Welfare State
The Spanish welfare state focuses on health, ensuring that every person has the right to social security, irrespective of their income level. Education is compulsory until 16 years of age. According to the constitution, everyone has the right to housing. To ensure this right, measures such as pay cuts may be implemented.
There are three groups of benefits: universal and contributory. Social financing for these benefits is mixed, coming from taxes and contributions.