lecture 12 - Business Finance Lecture 12 Review of the...

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66 Business Finance Lecture 12 Review of the Previous Lecture The Du Pont Identity Income Distribution Dividend Payout Ratio Retention Ratio Internal and Sustainable Growth Determinants of Growth Topics under Discussion Using Financial Statement Information Internal Uses External Uses Benchmarking Time Value of Money Future Value Concept One Period valuation Multi-Period Valuation Present Value Concept Using Financial Statements Information Now we take a look at some practical aspects of the financial statements analysis. Reasons for doing financial statements analysis Benchmarking the information Problems arising in the process Why Evaluate Financial Statements Primary reason for looking at the accounting information is that we don’t have and cant expect to get market value information. But if we have such information, we will use it instead of accounting data. If there is a conflict between accounting and market data, market data would be preferred. Why Evaluate Financial Statements Financial statements analysis is an application of management by exception and boils down to comparing ratios for one business with some average or representative ratios. The ratios differing considerably from averages are studied further.
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67 Internal Uses Performance Evaluation Profit margin and return on equity Comparing the performance of different divisions Planning for the future Historical information used for generating projections Checking the realism of assumptions for the projections
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This note was uploaded on 08/04/2011 for the course ACCT 501 taught by Professor Na during the Spring '11 term at Virtual University of Pakistan.

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lecture 12 - Business Finance Lecture 12 Review of the...

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