financial statement analysis (ratio) presentation

7/26/2019 Financial Statement Analysis (Ratio) presentation

1/19

TOPIC 7FINANCIAL STATEMENT ANALYSIS

(RATIO)

HASLINA MUSTAFA

ACC106


2/19

Explain the objectives an !ses o"#atios to anal$%e the &nancial

state'ent (esc#ibe an explain the i)e#ent

&nancial #atios

Calc!late an inte#p#et the 'ain&nancial #atios

Learning objectives


3/19

O!ECTI"ES OF RATIOANALYSIS

To assess a b!siness* &nancialposition an potential +#o,th

To assess a b!siness* pe#"o#'ance in#elation to the pe#"o#'ance o" si'ila#b!sinesses in the sa'e in!st#$

To assess a b!siness* pe#"o#'ance"#o' one $ea# to anothe#

To assess the #is- o" p#oviin+ loans

to the b!siness b$ lene#s


4/19

TYPES OF FINANCIALRATIOS

.atios a#e classi&e into +#o!ps that #e/ectthe

&nancial pe#"o#'ance o# &nancial position The

"o!# 'ain +#o!ps o" &nancial #atios isc!ssein

this chapte# a#e

2#o&tabilit$ #atios

Li3!iit$ #atios

E4cienc$ #atios

Leve#a+e #atios


5/19

Pro#tabi$it% Ratios

&' ross Pro#t Margin

52M 5#oss p#o&t x 100Net Sales

. This #ep#esent the a'o!nt o" +#oss

p#o&t "o# eve#$ .M 1 o" sales. E+ 52 789 Fo# eve#$ .M 1 o"

sales: the b!siness is able to 'a-e

.M 078 +#oss p#o&t

Meas!#es the p#o&tabilit$ in #elation to sales

an the e4cient !tili%ation o" availableb!siness* #eso!#ces in ea#nin+ p#o&ts It!s!all$ exp#esse as a pe#centa+e


6/19

' Net Pro#t MarginN2. Net p#o&t x 100

Net sales

This #ep#esents the a'o!nt o" net p#o&t"o# eve#$ .M 1 o" sales Net p#o&t is tobe eval!ate a"te# ta-in+ into acco!ntall #even!es an expenses

E+ N2M 819: "o# eve#$ .M1 o" sales:the co'pan$ can 'a-e 81 sen o" netp#o&t

Pro#tabi$it% Ratios


7/19

*' Ret+rn on Assets (ROA).;A Net p#o&t x 100

Total Assets

2#ovies an ove#all 'eas!#e o"b!siness pe#"o#'ance

It 'eas!#e the e)ectiveness o"'ana+e'ent in +ene#atin+ p#o&ts"#o' the !se o" available assets

Pro#tabi$it% Ratios


8/19

,' Ret+rn on E-+it% (ROE).;E Net p#o&t x 100

Capital E'plo$e

Meas!#es the e4cienc$ o" the'ana+e'ent !tili%e the "!ns to'a-e p#o&t

E+ .;E 689 This 'eans that theco has !tili%e 689 o" its capital to+ene#ate the co*s p#o&t "o# thatacco!ntin+ pe#io

Pro#tabi$it% Ratios


9/19

Li-+i.it% Ratios

Meas!#es the abilit$ o" the b!siness to pa$its sho#t


10/19

&' C+rrent RatioC. C!##ent Asset

C!##ent Liabilities

Inicates the b!siness abilit$ to pa$ itsc!##ent liabilities ,hen the$ !e

Hi+h #atio is 'o#e li3!i ? has s!4cientli3!i assets to cove# c!##ent liabilities

E+ C. @1 @ ti'esB: the b!siness has.M @ o" c!##ent assets to cove# "o#eve#$ .M 1 o" c!##ent liabilit$

Li-+i.it% Ratios


11/19

' /+ic0 Ratio1 Aci. Test Ratio. C!##ent Assets > Closin+ Stoc- > 2#epaiexpenses

C!##ent Liabilities

Tests the b!siness abilit$ to pa$ itsi''eiate obli+ations

Hi+h #atio is 'o#e li3!i ? has s!4cient

li3!i assets to cove# c!##ent liabilities E+ . @1 @ ti'esB: the b!siness has

.M @ o" c!##ent assets to cove# "o# eve#$

.M 1 o" c!##ent liabilit$

Li-+i.it% Ratios


12/19

E2cienc%1 Activit% Ratios

&' Inventor% T+rnover Ratio

IT; Cost o" +oos sol

Ave#a+e stoc-

. Ave#a+e stoc- openin+ stoc- D closin+ stoc-

@

. I" the openin+ stoc- is not available "o# ete#'inin+the ave#a+e stoc-: the closin+ stoc- &+!#e is !se

. Inicates no o" ti'es that invento#ies has to be#eplace ,ithin an acco!ntin+ pe#io

. Hi+he# IT;: the bette# it is

Meas!#es 'ana+e'ent e4cienc$ in

'ana+in+ o# !tili%in+ the va#io!s #eso!#ceso" the b!siness to +ene#ate #even!es


13/19

' A1c Receivab$es Co$$ection Perio.(C2 Ac .eceivables x 867 a$s

C#eit sales

It #ep#esent the len+th o" ti'e a b!siness!ne#ta-es to collect 'one$ "#o' itsebto#s o# ac #eceivable

The sho#te# the pe#io: the bette# it is "o#the b!siness in te#'s o" its li3!iit$

E2cienc%1 Activit% Ratios


14/19

*' A1c Pa%ab$es Co$$ection Perio.CC2 Ac 2a$ables x 867 a$s

C#eit p!#chases

It #ep#esent the len+th o" ti'e ab!siness !ne#ta-es to pa$ it*s c#eito#so# ac pa$ables

The sho#te# the pe#io sho,s theb!siness is e4cient in 'eetin+ its sho#t

financial statement analysis (ratio) presentation

Documents