Chapter1 - Overview of Financial Statement Analysis CHAPTER...

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1 CHAPTER Overview of Financial Statement Analysis
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Business Analysis Evaluate Prospects Evaluate Risks Business Decision Makers Equity investors Creditors Managers Merger and Acquisition Analysts External Auditors Directors Regulators Lawyers
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Information Sources for Business Analysis Quantitative Financial Statements Industry Statistics Economic Indicators Regulatory filings Trade reports Qualitative Management Discussion & Analysis Chairperson’s Letter Vision/Mission Statement Financial Press Press Releases Web sites
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Types of Business Analysis Credit Analysis Equity Analysis Management & Control Mergers, Acquisitions Director Oversight Regulation External Auditing Labor Negotiations Financial Management
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Credit Analysis Trade Creditors Provide goods or services Most short-term Usually implicit interest Bear risk of default Non-trade Creditors Provide major financing Most long-term Usually explicit interest Bear risk of default Creditors
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Credit Analysis Liquidity Ability to meet short- term obligations Focus : Current Financial conditions Current cash flows Liquidity of assets Solvency Ability to meet long- term obligations Focus : Long-term financial conditions Long-term cash flows Extended profitability Credit worthiness: Ability to honor credit obligations (downside risk)
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Equity Analysis Technical Analysis Charting Patterns in price behavior or volume history Predict future price movements Fundamental Analysis Determine value without reference to price Analyze and interpret Economy Industry Company Assessment of downside risk and upside potential
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Intrinsic Value (or Fundamental Value)   Intrinsic value > Market value Buy Intrinsic value < Market value Sell Intrinsic value = Market value Hold Value of Company (or stock) without reference to market value (or stock price) Strategy
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This note was uploaded on 08/05/2010 for the course FI575 FI575 taught by Professor Srinivasan during the Summer '08 term at Keller Graduate School of Management.

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Chapter1 - Overview of Financial Statement Analysis CHAPTER...

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