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

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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