lecture_17-analysis_of_accounts_1

lecture_17-analysis_of_accounts_1 - MA826 17- Analysis of...

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MA826 17- Analysis of Accounts
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Introduction Those working as financial/actuarial experts need to analyse company accounts in two areas: Appraisal of a company for investment purposes. Understanding presentation of the results of financial institutions for which they work.
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Introduction Accounting ratios are the tools used for the analysis of accounts defined and devised for different purposes. Their use eliminates distortions caused by differing sizes of company.
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Introduction Often no uniquely correct definition of a ratio, or any “correct” ratio to use in a particular scenario. We define and use the most commonly use form of ratios. But need to consider variations of the ratio which may be more appropriate in some circumstances.
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Risks of loan capital ?? Will interest/coupon be paid? In the event of default will there be enough assets to repay the capital? How much money is left over after interest charges have been met? How volatile is that amount?
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Pro’s and Cons of loan capital from the shareholders’ point of view Pro’s Usually a cheap source of finance due to low risk to the lender. Which should imply a higher rate of return from the company overall to the shareholders. Cons
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This note was uploaded on 06/07/2011 for the course MA 826 taught by Professor Loba,millet during the Spring '11 term at Kent Uni..

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lecture_17-analysis_of_accounts_1 - MA826 17- Analysis of...

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