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Unformatted text preview: 1 ment for Print and Digital Media ersity Budgets & Financial Reports GrC 421 Production Managem California Polytechnic State Unive ment for Print and Digital Media ersity Financial Analysis Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their basis in making business GrC 421 Production Managem California Polytechnic State Unive management as one of their basis in making business decisions. ent for Print and Digital Media ersity Financial Analysis Based on these reports, management may: • Continue or discontinue its main operation or part of its business • Make or purchase certain materials in the manufacture of its product • Acquire or rent/lease certain machineries and equipments in the production of its good GrC 421 Production Managem California Polytechnic State Unive the production of its goods • Issue stocks or negotiate for a bank loan to increase its working capital • Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business ent for Print and Digital Media ersity Goals of Financial Analysis Financial analysts often assess the firm's: 1. Profitability- its ability to earn income and sustain growth in both the short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations 2. Solvency- its ability to pay its obligation to debtors and other third parties in the long-term GrC 421 Production Managem California Polytechnic State Unive third parties in the long term 3. Liquidity- its ability to maintain positive cash flow, while satisfying immediate obligations 4. Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time. ment for Print and Digital Media ersity Financial Statements Financial statements (or financial reports ) are formal records of a business' financial activities. There are four basic financial statements: 1. Balance Sheet - also referred to as statement of financial condition, reports on a company's assets, liabilities and net equity as of a given point in time....
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This note was uploaded on 12/05/2011 for the course GRC 421 taught by Professor Dougspeer during the Fall '11 term at Cal Poly.
- Fall '11