beginners guide for business financial analysis

8/17/2019 Beginners Guide for Business Financial Analysis

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Beginners'Guide For BusinessFinancial Analysis

by reading income stat,balance sheet & calculating financial ratios

Presented by:Lexington Corporate Advisors


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Need For Financial Analysis

It helps the investors to understand the position,standing and

profitability of the business firm in the market

It helps the business managers to run the organiation more

efficiently and profitably


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Financial !tatements

Balance sheet"sho#s #hat a company o#ns and #hat it o#es during

a particular time

Income statement"sho#s total money a company made and spent

over a period of time

$ashflo# statement"sho#s the money e%changed by the company to

the outside #orld over a period of time


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Balance !heet

he formula" Assets !hare (older's )*uity + iabilities -

summaries balance sheet

Asset"#hat co. o#ns - e%"cash,bank deposits,inventory,plant &

machinery,e*uipments,bills receivable et.al

iabilities"#hat co. o#es - e%"loan,overdraft,creditors,bills

payable,salary outstanding et.al

!hareholder e*uity"Also called capital or net #orth.It/s the

money that belongs to the shareholder or the o#ners of the co.

It is the money left after assets selloff & liabilities payoff


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Income !tatement

It sho#s ho# much revenue a company earned during a specific

time period0a year in general1. It lists all the e%penses andpay off on one side and revenues and gains on the other balance

are summed up and the differentiating factor is profit or loss


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$ash Flo# !tatements

hey report a company/s inflo#s and outflo#s of cash. Bottom

line of the cash flo# statement sho#s the net increase ordecrease in cash for the period.

It calculates cash generated or utilied from operating

activities,investment activities and financing activities to

arrive at the balance net increase or decrease in cash


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2ead 34&A 2eports

3anagement/s 4iscussion and Analysis provide investors #ith its

vie# of the financial performance and condition of the company

It reveals investors #hat the financial statements sho# and do

not sho#,as #ell as important trends and risks that had shaped

the past or likely to shape future

It is intended to help investors to see the company through the

eyes of management

It is also intended to provide conte%t for the financial

statements and information about the company/s earnings and cash

flo#s


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2eading Footnotes

Going through cos. accounting policies and practices provide

significant information about co's #orkings and undertakings

2ead info about the federal,local and state ta%es payable

Get the information about stock options granted to companies'

officers and employees


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Financial 2atio Analysis

2atio analysis help to analye some of the key factors and to

give insight of the companies' internal state of affairs

5. 4ebt-to-e*uity ratio compares a company/s total debt to

shareholders/ e*uity

4ebt-to-)*uity 2atio otal iabilities 6 !hareholders/ )*uity

7. Inventory turnover ratio compares a company/s cost of saleson its income statement #ith its average inventory balance for

the period

Inventory urnover 2atio $ost of !ales 6 Average Inventory for

the 8eriod

9. :perating margin compares a company/s operating income to netrevenues

:perating 3argin Income from :perations 6 Net 2evenues

contd....


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Financial 2atio Analysis

;. 86) ratio compares a company/s common stock price #ith its

earnings per share

86) 2atio 8rice per share 6 )arnings per share

$urrent iabilities


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