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

Display results as :
 


Rechercher Advanced Search

Latest topics
» රාජ්‍ය සමාගම් කොටස් වෙළෙඳපොළට ගෙන ආ යුතුයි
Financial Statement Analysis EmptyToday at 11:45 am by කිත්සිරි ද සිල්වා

» Sri Lanka interest rates should go down, currency will not fall: Mark Mobius
Financial Statement Analysis EmptyToday at 11:18 am by The Invisible

» Sri Lanka can resume high growth path, cut more taxes: Mark Mobius
Financial Statement Analysis EmptyToday at 11:02 am by The Invisible

» Gota's Era
Financial Statement Analysis EmptyToday at 10:35 am by The Invisible

» Equation of Happiness Solved
Financial Statement Analysis EmptyYesterday at 5:23 pm by Backstage

» How to get Access to: 104 Technical trading experiments by HUNTER
Financial Statement Analysis EmptyYesterday at 4:19 pm by HUNTER

» තැරැව්කාර සමාගමකට එරෙහිව කොටස් වෙළෙඳපොළ විනය ක්‍රියාමාර්ග ගනී
Financial Statement Analysis EmptyYesterday at 12:31 pm by Rana

» PABC.N0000 (Pan Asia Banking Corporation PLC)
Financial Statement Analysis EmptyMon Dec 09, 2019 6:41 pm by soileconomy

» East West properties
Financial Statement Analysis EmptyMon Dec 09, 2019 10:01 am by LSE

» COMB.N0000 ( COMMERCIAL BANK OF CEYLON PLC )
Financial Statement Analysis EmptySun Dec 08, 2019 11:07 pm by spw19721

» MHDL Millennium Housing
Financial Statement Analysis EmptySat Dec 07, 2019 12:35 pm by pure equity

» පොළී මුදලාලිලාට බලපත්‍ර ක්‍රමයක් හඳුන්වා දෙන්න තීරණයක්
Financial Statement Analysis EmptyFri Dec 06, 2019 11:33 pm by Backstage

» Dividend Announcement
Financial Statement Analysis EmptyFri Dec 06, 2019 10:10 pm by subash

» Colombo US Embassy Air Pollution
Financial Statement Analysis EmptyFri Dec 06, 2019 11:20 am by Ethical Trader

» DOCK.N0000 (COLOMBO DOCKYARD PLC)
Financial Statement Analysis EmptyFri Dec 06, 2019 5:24 am by soileconomy

» SINHAPUTHRA FINANCE PLC (SFL.N0000)
Financial Statement Analysis EmptyThu Dec 05, 2019 9:26 pm by The Invisible

» Land & Property sector chart
Financial Statement Analysis EmptyThu Dec 05, 2019 6:27 am by dhanurrox

» සිමෙන්ති මිල පහළට
Financial Statement Analysis EmptyWed Dec 04, 2019 7:05 pm by nihal123

» සුරැකුම්පත් කොමිසමට නව සභාපතිවරයෙක්
Financial Statement Analysis EmptyWed Dec 04, 2019 7:04 pm by nihal123

» පාස්කු ප්‍රහාරයෙන් පසු වැඩිම සංචාරක පැමිණීම නොවැම්බරයේ දී
Financial Statement Analysis EmptyWed Dec 04, 2019 7:02 pm by nihal123

» Flying is the Safest mode of Transport
Financial Statement Analysis EmptyWed Dec 04, 2019 10:37 am by කිත්සිරි ද සිල්වා

» OSEA .N
Financial Statement Analysis EmptyTue Dec 03, 2019 3:36 pm by dakzsl

» LIOC.N0000 (Lanka IOC PLC)
Financial Statement Analysis EmptyTue Dec 03, 2019 11:39 am by LSE

» Hayleys MGT
Financial Statement Analysis EmptyTue Dec 03, 2019 10:10 am by The Invisible

» Sri Lanka insurer regulatory capital drop with new accounting rules
Financial Statement Analysis EmptyTue Dec 03, 2019 9:19 am by The Invisible

» Thread for News on CSE and SL Economy
Financial Statement Analysis EmptyTue Dec 03, 2019 9:18 am by The Invisible

» Lanka Tiles
Financial Statement Analysis EmptySun Dec 01, 2019 8:43 pm by soileconomy

» ACL Cables
Financial Statement Analysis EmptyFri Nov 29, 2019 11:12 am by The Invisible

» RENUKA AGRI FOODS PLC ( RAL.N0000 )
Financial Statement Analysis EmptyThu Nov 28, 2019 6:04 am by sureshot

» SEYB.N0000 ( SEYLAN BANK PLC )
Financial Statement Analysis EmptyThu Nov 28, 2019 4:17 am by soileconomy

» Thought for the day...
Financial Statement Analysis EmptyTue Nov 26, 2019 7:40 pm by share1

» An Attitude Adjustment
Financial Statement Analysis EmptyTue Nov 26, 2019 12:36 pm by Backstage

» මහ බැංකු අධිපති ධූරයෙන් ඉවත් වෙයි
Financial Statement Analysis EmptyTue Nov 26, 2019 11:00 am by The Invisible

» Sri Lanka cement production picks up
Financial Statement Analysis EmptyTue Nov 26, 2019 9:22 am by Topcat

» Thread for News on Local and Foreign Politics
Financial Statement Analysis EmptyTue Nov 26, 2019 7:04 am by The Invisible

» SEC Chief says ready to hand over baton
Financial Statement Analysis EmptyMon Nov 25, 2019 8:12 pm by ruwan326

» Technology~විද්‍යාව ~ Wisdom
Financial Statement Analysis EmptyMon Nov 25, 2019 8:36 am by ruwan326

» The Theatre | Best movies to Watch
Financial Statement Analysis EmptySun Nov 24, 2019 5:18 pm by spw19721

» SHL.N0000 (Softlogic Holdings PLC)
Financial Statement Analysis EmptySun Nov 24, 2019 9:44 am by The Invisible

» An individual in pursuit of a porcupine found dead in a burrow
Financial Statement Analysis EmptyThu Nov 21, 2019 11:41 am by Backstage

» GLAS.N0000 (PIRAMAL GLASS CEYLON PLC)
Financial Statement Analysis EmptyThu Nov 21, 2019 7:51 am by ruwan326

» APLA.N0000 (ACL PLASTICS PLC)
Financial Statement Analysis EmptyWed Nov 20, 2019 11:03 pm by nesta

» භාරකාර ආණ්ඩුවක් හෙට
Financial Statement Analysis EmptyWed Nov 20, 2019 7:19 pm by nihal123

» ඇඟට නොදැනී ප්‍රතිඋත්තර දෙන හැටි
Financial Statement Analysis EmptyWed Nov 20, 2019 9:28 am by ruwan326

» මගේ කියවීම ...
Financial Statement Analysis EmptyWed Nov 20, 2019 8:28 am by yellow knife

» How the silence on this !
Financial Statement Analysis EmptyTue Nov 19, 2019 5:40 pm by Backstage

» ප්‍රතිඵලේ මොකක් උනත් ජ්යෝතිෂය සත්‍ය වෙන හැටි දැක්කද?
Financial Statement Analysis EmptyMon Nov 18, 2019 9:15 am by ruwan326

» ඇයි අප්සට් ද?
Financial Statement Analysis EmptySat Nov 16, 2019 4:57 pm by chutiputha

» ගෝඨාට ඉල්ලන්න බෑලු
Financial Statement Analysis EmptySat Nov 16, 2019 7:18 am by ruwan326

» සෞභාග්‍යතා දර්ශකයේ ඉහළ යාමක්
Financial Statement Analysis EmptyFri Nov 15, 2019 1:54 pm by nihal123

December 2019
SunMonTueWedThuFriSat
1234567
891011121314
15161718192021
22232425262728
293031    

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 Empty 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
nihal123
nihal123
Top contributor
Top contributor

Posts : 5901
Join date : 2014-02-24
Age : 53
Location : Waga

Back to top Go down

Financial Statement Analysis Empty 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."
Sriranga
Sriranga
Veteran
Veteran

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

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

Back to top Go down

Financial Statement Analysis Empty Re: Financial Statement Analysis

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

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

Posts : 1258
Join date : 2014-03-11

Back to top Go down

Financial Statement Analysis Empty Re: Financial Statement Analysis

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

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

Posts : 1908
Join date : 2014-11-09
Age : 33
Location : Mt.Lavinia

Back to top Go down

Back to top


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