The Investor Sentiment - Equity and investments forum for Sri Lankans
Search
 
 

Display results as :
 


Rechercher Advanced Search

Latest topics
»  මෙරට විශාලම ආයෝජනය වන හම්බන්තොට වරායේ අවසන් ආයෝජන මුදල වරාය අතට බාර දෙයි
Yesterday at 10:41 pm by spw19721

» CCS.N0000 ( Ceylon Cold Stores)
Yesterday at 10:09 pm by pjrngroup

» රජයේ සුරැකුම්වලින් රුපියල් බිලියන 2.7 ක විදෙස් ආයෝජන සතියක් තුළ දී ඉවතට
Yesterday at 9:11 am by serene

» ඩොලර් බිලියන 10 යි – මහ බැංකුව ඉතිහාසයේ වැඩිම විදේශ විනිමය සංචිතය ගොඩනගයි
Yesterday at 7:23 am by කිත්සිරි ද සිල්වා

» මාස 02 කදී කොටස් වෙළෙඳපොළ සියයට 4 කින් කඩා වැටිලා
Tue Jun 19, 2018 8:31 pm by serene

» කිම් - ට්‍රම්ප් හමුව: දෙරටේ නායකයෝ සාකච්ඡා අරඹති
Sun Jun 17, 2018 10:55 am by Ethical Trader

» DOCK.N0000 (COLOMBO DOCKYARD PLC)
Sat Jun 16, 2018 8:20 am by spw19721

» TPL.N0000 (TALAWAKALE PLANTATIONS )
Thu Jun 14, 2018 7:17 am by lanka

» සපත්තු පෙට්ටියකින් හමු වූ චීන මල් බඳුන පවුම් මිලියන 14 අලෙවි වේ
Wed Jun 13, 2018 12:03 pm by Ethical Trader

» Dividend Announcement
Wed Jun 13, 2018 11:49 am by Ethical Trader

» LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)
Wed Jun 13, 2018 11:47 am by Ethical Trader

» ලංකාවේ ඉපිද, බ්‍රිතාන්‍යයේ නගරාධිපති පදවියකට පත් වූ කරීමා
Tue Jun 12, 2018 3:19 pm by Ethical Trader

» KGAL.N0000 (Kegalle Plantation PLC)
Tue Jun 12, 2018 2:40 pm by Ethical Trader

» Where in the world is it easiest to get rich?
Tue Jun 12, 2018 7:53 am by CK

» "එළ හරකා - මී හරකා ආර්ථික ප්‍රතිපත්ති" සහ ඩොලරයට සාපේක්ෂව පහළ වැටෙන රුපියල
Sat Jun 09, 2018 11:07 am by Ethical Trader

» Top 20 magnificient eyes from around the world
Fri Jun 08, 2018 11:10 am by Ethical Trader

» ගෝඨාභය නඩු: උපරිමාධිකරණ විනිසුරුවරුන් දෙදෙනෙක් ඉවත්වෙති
Thu Jun 07, 2018 6:16 pm by sashimaal

» මුහුදු පතුලේ තැන්පත් කළ දත්ත ගබඩාව "යථාර්ථයක් විය හැකි විකාර අදහසක්"
Thu Jun 07, 2018 6:00 pm by Ethical Trader

» KFP.N0000(Keels Food Products PLC)
Thu Jun 07, 2018 8:54 am by lanka

» Sri Lanka Port Authority profits up after China takeover of Hambantota
Wed Jun 06, 2018 5:58 pm by Ethical Trader

» Tax hike to trim profits of Sri Lankan life insurers: Fitch
Wed Jun 06, 2018 5:55 pm by Ethical Trader

» Rupee weakens, stocks gain 0.23-pct
Wed Jun 06, 2018 5:54 pm by Ethical Trader

» ශ්‍රී ලංකාවේ 'අධිකරණයට අපහාස කිරීම' ගැන දැන සිටිය යුතු නීති පසුබිම
Tue Jun 05, 2018 6:50 pm by කිත්සිරි ද සිල්වා

» Sri Lanka finance ministry accounts qualified by Auditor General
Tue Jun 05, 2018 1:28 pm by Ethical Trader

» IFC invests US$2.5mn in Sri Lanka's PickMe
Tue Jun 05, 2018 1:22 pm by Ethical Trader

» Sri Lanka state banks most in need capital for Basel III, new risk identified
Tue Jun 05, 2018 1:21 pm by Ethical Trader

» Sri Lanka's ETI Finance able to settle small depositors if liquidated
Tue Jun 05, 2018 12:53 pm by The Invisible

» Oil steady as extra U.S. supply balances strong demand
Mon Jun 04, 2018 3:59 pm by කිත්සිරි ද සිල්වා

» In the Meantime, Within Our Shores !
Mon Jun 04, 2018 3:32 pm by කිත්සිරි ද සිල්වා

» Cartoon of the day...
Mon Jun 04, 2018 11:47 am by nihal123

» SPEN.N0000
Sat Jun 02, 2018 6:19 pm by Ethical Trader

» තායිලන්තයෙන් අභ්‍යවකාශයට යන 'දූරියන්'
Fri Jun 01, 2018 5:18 pm by Ethical Trader

» නාසා අභ්‍යවකාශ යානයක් ප්ලූටෝ මත මීතේන් අයිස් වැටි සොයාගනී
Fri Jun 01, 2018 5:12 pm by Ethical Trader

» ඉන්දියාව ඉදිරියේ ශ්‍රී ලංකාව බලවත් වෙයි
Fri Jun 01, 2018 3:20 pm by sashimaal

» බන කියන පුංචි දරැවා
Fri Jun 01, 2018 11:21 am by Ethical Trader

» දරුවෙක් බේරාගත් මාලි ජාතික 'ස්පයිඩර් මෑන්'ට ප්‍රංශ පුරවැසිභාවය
Thu May 31, 2018 5:00 pm by Yin-Yang

» Exclusive: Cricket match-fixers caught in the act in Sri Lanka
Mon May 28, 2018 7:41 pm by sashimaal

» RIL.N0000 ( RIL Property )
Mon May 28, 2018 10:04 am by eco

» BFL.N0000 (Bairaha Farms PLC)
Sun May 27, 2018 10:39 pm by seek

» MTD Walkers (KAPI)
Sun May 27, 2018 10:34 pm by seek

» Sri Lanka's ex-Sports minister admits sleaze
Sat May 26, 2018 10:49 pm by Ethical Trader

» HNB regrets unauthorized incident at branch and says action taken
Sat May 26, 2018 10:15 pm by Ethical Trader

» Listed Sri Lanka hospitals have strong growth prospects: Fitch
Sat May 26, 2018 10:04 pm by Ethical Trader

» ශ්‍රී ලාoකීය බෞද්ධයාගේ සම්මා දිට්ඨිය
Sat May 26, 2018 10:03 pm by Ethical Trader

» Food for Thought
Sat May 26, 2018 11:24 am by Ethical Trader

» Theory of Everything
Fri May 25, 2018 3:33 pm by Ethical Trader

» ඊ.ටි.අයි ෆිනෑන්ස් විකිණිමට මහ බැංකුවේ අවසරය
Tue May 22, 2018 9:43 pm by Ethical Trader

» Elsewhere vs SL : Honesty, Social responsibility , Word twisting and Decency
Tue May 22, 2018 8:53 pm by Yin-Yang

» Whats ailing Sri Lanka ? Why we are what we are!
Tue May 22, 2018 6:02 pm by Yin-Yang

» Karl Marx and the Social Sciences
Sun May 20, 2018 11:25 pm by Backstage

June 2018
SunMonTueWedThuFriSat
     12
3456789
10111213141516
17181920212223
24252627282930

Calendar Calendar

Disclaimer


Information posted in this forum are entirely of the respective members' personal views. The views posted on this open online forum of contributors do not constitute a recommendation buy or sell. The site nor the connected parties will be responsible for the posts posted on the forum and will take best possible action to remove any unlawful or inappropriate posts.
All rights to articles of value authored by members posted on the forum belong to the respective authors. Re-using without the consent of the authors is prohibited. Due credit with links to original source should be given when quoting content from the forum.
This is an educational portal and not one that gives recommendations. Please obtain investment advises from a Registered Investment Advisor through a stock broker

Financial Statement Analysis

Go down

Financial Statement Analysis

Post by nihal123 on Mon Aug 10, 2015 9:26 pm

Financial Statement Analysis
Overview of Financial Statement Analysis

Financial statement analysis involves the identification of the following items for a company's financial statements over a series of reporting periods:



Trends. Create trend lines for key items in the financial statements over multiple time periods, to see how the company is performing. Typical trend lines are for revenues, the gross margin, net profits, cash, accounts receivable, and debt.
Proportion analysis. An array of ratios are available for discerning the relationship between the size of various accounts in the financial statements. For example, you can calculate a company's quick ratio to estimate its ability to pay its immediate liabilities, or its debt to equity ratio to see if it has taken on too much debt. These analyses are frequently between the revenues and expenses listed on the income statement and the assets, liabilities, and equity accounts listed on the balance sheet.
Financial statement analysis is an exceptionally powerful tool for a variety of users of financial statements, each having different objectives in learning about the financial circumstances of the entity.

Users of Financial Statement Analysis

There are a number of users of financial statement analysis. They are:

Creditors. Anyone who has lent funds to a company is interested in its ability to pay back the debt, and so will focus on various cash flow measures.
Investors. Both current and prospective investors examine financial statements to learn about a company's ability to continue issuing dividends, or to generate cash flow, or to continue growing at its historical rate (depending upon their investment philisophies).
Management. The company controller prepares an ongoing analysis of the company's financial results, particularly in relation to a number of operational metrics that are not seen by outside entities (such as the cost per delivery, cost per distribution channel, profit by product, and so forth).
Regulatory authorities. If a company is publicly held, its financial statements are examined by the Securities and Exchange Commission (if the company files in the United States) to see if its statements conform to the various accounting standards and the rules of the SEC.
Methods of Financial Statement Analysis

There are two key methods for analyzing financial statements. The first method is the use of horizontal and vertical analysis. Horizontal analysis is the comparison of financial information over a series of reporting periods, while vertical analysis is the proportional analysis of a financial statement, where each line item on a financial statement is listed as a percentage of another item. Typically, this means that every line item on an income statement is stated as a percentage of gross sales, while every line item on a balance sheet is stated as a percentage of total assets. Thus, horizontal analysis is the review of the results of multiple time periods, whiile vertical analysis is the review of the proportion of accounts to each other within a single period. The following links will direct you to more information about horizontal and vertical analyis:

Horizontal analysis
Vertical analysis
The second method for analyzing financial statements is the use of many kinds of ratios. You use ratios to calculate the relative size of one number in relation to another. After you calculate a ratio, you can then compare it to the same ratio calculated for a prior period, or that is based on an industry average, to see if the company is performing in accordance with expectations. In a typical financial statement analysis, most ratios will be within expectations, while a small number will flag potential problems that will attract the attention of the reviewer.

There are several general categories of ratios, each designed to examine a different aspect of a company's performance. The general groups of ratios are:

Liquidity ratios. This is the most fundamentally important set of ratios, because they measure the ability of a company to remain in business. Click the following links for a thorough review of each ratio.
Cash coverage ratio. Shows the amount of cash available to pay interest.
Current ratio. Measures the amount of liquidity available to pay for current liabilities.
Quick ratio. The same as the current ratio, but does not include inventory.
Liquidity index. Measures the amount of time required to convert assets into cash.
Activity ratios. These ratios are a strong indicator of the quality of management, since they reveal how well management is utilizing company resources. Click the following links for a thorough review of each ratio.
Accounts payable turnover ratio. Measures the speed with which a company pays its suppliers.
Accounts receivable turnover ratio. Measures a company's ability to collect accounts receivable.
Fixed asset turnover ratio. Measures a company's ability to generate sales from a certain base of fixed assets.
Inventory turnover ratio. Measures the amount of inventory needed to support a given level of sales.
Sales to working capital ratio. Shows the amount of working capital required to support a given amount of sales.
Working capital turnover ratio. Measures a company's ability to generate sales from a certain base of working capital.
Leverage ratios. These ratios reveal the extent to which a company is relying upon debt to fund its operations, and its ability to pay back the debt. Click the following links for a thorough review of each ratio.
Debt to equity ratio. Shows the extent to which management is willing to fund operations with debt, rather than equity.
Debt service coverage ratio. Reveals the ability of a company to pay its debt obligations.
Fixed charge coverage. Shows the ability of a company to pay for its fixed costs.
Profitability ratios. These ratios measure how well a company performs in generating a profit. Click the following links for a thorough review of each ratio.
Breakeven point. Reveals the sales level at which a company breaks even.
Contribution margin ratio. Shows the profits left after variable costs are subtracted from sales.
Gross profit ratio. Shows revenues minus the cost of goods sold, as a proportion of sales.
Margin of safety. Calculates the amount by which sales must drop before a company reaches its breakeven point.
Net profit ratio. Calculates the amount of profit after taxes and all expenses have been deducted from net sales.
Return on equity. Shows company profit as a percentage of equity.
Return on net assets. Shows company profits as a percentage of fixed assets and working capital.
Return on operating assets. Shows company profit as percentage of assets utilized.
Problems with Financial Statement Analysis

While financial statement analysis is an excellent tool, there are several issues to be aware of that can interfere with your interpretation of the analysis results. These issues are:

Comparability between periods. The company preparing the financial statements may have changed the accounts in which it stores financial information, so that results may differ from period to period. For example, an expense may appear in the cost of goods sold in one period, and in administrative expenses in another period.
Comparability between companies. An analyst frequently compares the financial ratios of different companies in order to see how they match up against each other. However, each company may aggregate financial information differently, so that the results of their ratios are not really comparable. This can lead an analyst to draw incorrect conclusions about the results of a company in comparison to its competitors.
Operational information. Financial analysis only reviews a company's financial information, not its operational information, so you cannot see a variety of key indicators of future performance, such as the size of the order backlog, or changes in warranty claims. Thus, financial analysis only presents part of the total picture.

http://www.accountingtools.com/financial-statement-analysis
avatar
nihal123
Top contributor
Top contributor

Posts : 4554
Join date : 2014-02-24
Age : 52
Location : Waga

Back to top Go down

Re: Financial Statement Analysis

Post by Sriranga on Mon Aug 10, 2015 10:29 pm

Thanks a lot.

_________________
"Investing is easy to learn, but it takes a lifetime to master."
avatar
Sriranga
Veteran
Veteran

Posts : 3226
Join date : 2014-02-23
Location : Colombo

http://sharemarket-srilanka.blogspot.co.uk/

Back to top Go down

Re: Financial Statement Analysis

Post by Leon on Mon Aug 10, 2015 10:33 pm

Very useful. + rep nihal
avatar
Leon
Top contributor
Top contributor

Posts : 1233
Join date : 2014-03-11

Back to top Go down

Re: Financial Statement Analysis

Post by chutiputha on Tue Aug 11, 2015 12:07 am

Thank U Nihal Ayya...Oyath Hoyaganna euwa Smile ++
avatar
chutiputha
Top contributor
Top contributor

Posts : 1831
Join date : 2014-11-09
Age : 32
Location : Bei Jing

Back to top Go down

Back to top


 
Permissions in this forum:
You cannot reply to topics in this forum