PP Lesson 2 Financial Statement Analysis - FINANCIAL...

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FINANCIAL FINANCIAL STATEMENT STATEMENT ANALYSIS ANALYSIS Introduction Income Statement Balance Sheet Cash Flow Ratios Comparison and Trend
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Introduction What is financial statement analysis? The assessment of a firm's past, present and predicted future financial condition. a company's financial performance is analyzed over a period of time. The selection, evaluation and interpretation of financial data, along with other pertinent information, to assist in investment and financial decision
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Introduction Importance of financial statement analysis Internally (staff of the company)- to measure the company's performance such as to evaluate issues like employees performance, efficiency of operations, and credit policies Shareholders - tell them the present and future earnings of a particular company Externally, to evaluate potential investments and credit worthiness of borrowers
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Introduction Source of information Primary: annual report An annual report of a company informs investors about the company's financial health. Secondary: market prices of securities, economic data
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Financial Statement Analysis Balance Sheet Balance Sheet Cash Flow Statement Cash Flow Statement Income Statement Income Statement
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The Balance Sheet A statement of the firm’s financial position at a specific point in time provides record of the firm assets, liabilities and stockholders’ equity Assets resources owned by the firm Liabilities & owners’ equity indicates how assets are financed Assets = Liabilities (debt) + owners’ equity
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Balance Sheet Current Liabilities: Obligations of the business enterprise which is due within one-year, or an accounting cycle. 1. Accounts payable 2. Accrued expenses 3. Short term debt Current Liabilities: Obligations of the business enterprise which is due within one-year, or an accounting cycle. 1. Accounts payable 2. Accrued expenses 3. Short term debt Fixed Assets: Comprise of physical and non-physical asset. 1. Gross/ Net Plant and Equipment 2. Accumulated Depreciation 3. Trademark/ Patent/ Goodwill Fixed Assets: Comprise of physical and non-physical asset. 1. Gross/ Net Plant and Equipment 2. Accumulated Depreciation 3. Trademark/ Patent/ Goodwill Long Term Liabilities: Obligations due beyond one year. 1. Notes payable and bonds 2. Capital leases 3. Deferred taxes Long Term Liabilities: Obligations due beyond one year. 1. Notes payable and bonds 2. Capital leases 3. Deferred taxes Shareholder’s Equity: Ownership interest of business enterprise 1. Common stock 2. Preferred stock 3. Additional paid-in capital 4. Retained earnings Shareholder’s Equity: Ownership interest of business enterprise 1. Common stock 2. Preferred stock 3. Additional paid-in capital 4. Retained earnings Current Assets:
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