Financial Analysis introduction

Purpose of Financial Statement Analysis for investors

• analyzing and checking the allocation of relevant resources of the enterprise

• analyzing the profitability, operational capacity, investment returns and risks

• analyzing the solvency of enterprises

• analyzing the structure (various ratios or indicators) and the trend

Structural Analysis provides

• horizontal comparison of the report structure, find out the major indicators difference with peer companies and analyze the reasons

• analyze whether the increase in assets comes from debt or equity (profit or shareholder input)

• focus on changes in gross margin and market share

• how much cash the company has received in a period of time

Trend Analysis provides

• analysis the profit and loss of the company over a period of time

• make a horizontal comparison of the report structure

• focus on changes in the proportion of each asset account, which often reflects changes in the model of the enterprise.

Financial Statement Analysis is designed for

The liquidity analysis of an enterprise is

• an analysis of the assets, grouped according to the degree of their liquidity

• an analysis of the liquidity of its balance sheet

• calculation of the drivers/ratios of the business for the historical period

• analysis of each element of profit

Liquidity of the balance is

• the solvency of the enterprise

• analysis of financial sustainability

• the degree of coverage of the enterprise's liabilities with assets

• all answers are correct

Common Liquidity Ratios include

• The current ratio

• Net Profit Margin

• Return on capital

• Quick ratio

Short-term liabilities include

• accounts payable, settlements on dividends

• long-term loans and other long-term liabilities

• short-term loans from banks and other loans due for repayment within 12 months

• current assets

Slowly sold assets are:

• the amounts for all cash items

• assets that require a certain amount of time to circulate in cash

• inventories, accounts receivable (payments are expected more than 12 months)

• Capital and Reserves

Days Sales Outstanding (DSO) means

• the average number of days it takes a company to collect payment after it makes a sale

• average accounts receivable

• to compare the amount of cash and investments to short-term liabilities

• ability to pay debt obligations and continue business operations