...Week 1 Financial reporting and its analysis has an important role in the information intermediaries (auditors, press, financial analysts) and financial intermediaries (banks, insurance companies, mutual funds) functioning. Information intermediaries and financial intermediaries use the information from the financial reports to investigate the investment opportunities and find the “good” ones (Palepu, Healy & Peek, 2013). The “lemons” problem explains the problem in identifying the “good” and “bad” ideas being offered in the market (Holod & Peek, n.d.). The “bad” ideas are valued by investors at an average level, as they know that in the market there are both types of ideas. This approach, unfortunately, leads to less attractive conditions of financing to the owners of “good” ideas; the proportion of “bad” ideas increases. The identification of “good” investments can be performed by following the four steps (Palepu, Healy & Peek, 2013): * Business strategy analysis * Accounting analysis * Financial analysis * Prospective analysis All the above analysis get the information from the financial statements, publically data available, from business application context that consists of credit analysis, debt analysis, general business analysis and other details on corporate business (Palepu, Healy & Peek, 2013). The business strategy analysis is a tool to form the performance expectations using industry data and competitive strategy data. Accounting analysis assess...
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...What types of financial ratios are used to analyze financial performance? Financial ratios are categorized corresponding to the data they provide. The following terms are types of ratios used: 1. Liquidity ratios 2. Asset turnover ratios 3. Financial leverage ratios 4. Profitability ratios 5. Dividend policy ratios Are some more important than others? Why? Financial ratios give insight into an organization’s way of management and its financial state. Most ratios defined above can be evaluated from data made available by compiled financial statements. Which ratios are important to creditors, investors, and managers? Why? The importance of these rations allows a firm to analyze the market place and to measure the firm's financial data against those of other companies to steer away from unwanted financial problems- shutting down of operations. What is the purpose of financial statement analysis? According to (Robinson, Henry and Pirie, 2012), the purpose of a financial statement analysis is comprised of: • Evaluation of equity/debt investment/credit rating • Transfer of information • To use an analysis to develop a given financial statement inquiry. Robinson, T. A., Henry, E., & Pirie, W. L. (2012). International Financial Statement Analysis (2nd ed.). Hoboken, NJ: John Wiley and Sons, Inc.. What are some tools we might use to analyze financial performance? Readyratios.com (2014) informs that analysis of financial performance can be: • SWOT (strength...
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...What is financial accounting? Financial accounting is regarded as a professional in modern society. Most of the firms, especially the large ones, need it and have a particular department or team called accounting. In universities, financial accounting becomes a compulsory subject which BBA students must study. It is so well known that almost all people have heard of it. What actually is financial accounting? More specifically, what the main objectives or roles financial accounting has so that firms need it at a critical manner? Generally speaking, the purpose of accounting is to give relevant data or information that is necessary to make sound decision for the firms. And the main objective of financial accounting is to prepare financial statements such as statement of financial position, income statement, statement of owner’s equity and statement of cash flow. The preparation must be guided by generally accepted accounting principles, “GAAP” in short, of the physical location. The statements are then used to tell the external users the performance of the firm (Eisen, 2003). And the primary need for financial accounting, or sometimes called financial accountancy, is to minimize the principal-agent problems in organizations. This is to be done by evaluating and monitoring agents’ (manager) production and presenting the performance to people who interest in. In addition, financial accounting serves a lot of important objectives. It aims to understand the operation of the business...
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...Business Analysis and Valuation Report Prepared By: Version # Updated on ------------------------------------------------- Acknowledgments ------------------------------------------------- If applicable, include acknowledgement to contributing individuals: ------------------------------------------------- ------------------------------------------------- Analyst’s Name | Number | E-Mail Address | | | | Document Name | | Date Created | | Milestone 1 date submitted | | Milestone 2 date submitted | | Milestone 3 date submitted | | Finalization date | | | | | | | | REPORT VERSION RECORD The Business Analysis and Valuation Report is a managed document with tracking of versions, changes, and release dates for each of the three milestones. Version Name | Version Number | Date | Author(s) Name(s) | Change Description | | | | | Document created | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Milestone versions of the report are issued including the complete document with the sections completed to date to reflect the work to date by the analyst team. The milestone versions of the document are authorized for release only after the analyst’s signature has been obtained. Milestone 1 PREPARED: DATE:___/___/___ (for acceptance) (, signature) POSITION: ___ Milestone 2 PREPARED: DATE:___/___/___ ...
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... : Monday 2:30 pm to 6:30 pm Role and Purpose This subject aims to introduce an analytical framework for carrying out business analysis and valuation by using financial statements for valuing different kind of businesses. It contributes to the achievement of the BBA Programme Outcomes by enabling students to identify and resolve ethical issues contained in the financial statements (Outcome 4), apply basic accounting and financial theories to analyze financial reports and to identify potential problems and risks (Outcome 7). By the end of this subject, students will become a professional user of financial statements to advance further into the field of business valuation as investment analysis. It requires students to present and communicate effectively in English for general business communication (Outcome 1). Learning Outcomes Upon completion of the subject, students will be able to: a. Develop the ability to critically assess a firm’s financial condition through analyzing financial statements; b. Apply analytical tools to make forecasts and value firms and projects using different valuation techniques; in certain business context such as credit analysis and equity valuation. c. Evaluate and compare corporate valuation decision in specific contexts such as securities analysis, credit assessment...
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...9-193-029 REV: SEPTEMBER 13, 2004 WILLIAM BRUNS Introduction to Financial Ratios and Financial Statement Analysis There is almost always a reason why someone picks up an organization’s financial statements and begins to analyze them. Lenders or creditors may be interested in determining whether they will be repaid money they have lent or may lend to the organization. Investors may be interested in comparing a potential investment in one organization with that of another. Employees may want to compare the current performance or financial status of their employer with earlier periods. Regulatory agencies often need to assess organizational or industry financial health and performance. Financial analysis is always based on a set of questions, and the specific questions requiring answers depend on who the financial statement user is and the reasons for his or her analysis. Financial analyses based on accounting information consistently involve comparisons. Amounts or ratios may be compared with industry norms, the same measurement in a prior period, the same measurement in a competitor’s organization, or with planned and budgeted amounts previously established. Figuring out which comparisons will best answer the questions motivating the analysis is one of the necessary steps in making the best use of accounting information. Financial ratios can help describe the financial condition of an organization, the efficiency of its activities, its comparable profitability...
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...WRITING A FINANCIAL STATEMENT ANALYSIS REPORT FOR A POTENTIAL USER The financial analyst should research, analyse and evaluate the company’s consolidated financial results. He/she should then compare such analysis and evaluation with that of a competitor or more working in the same industry group. The competitor should have the similar size (measured by total assets, sales turnover, number of employees, and/or capital employed) of the main company. The competitor should also have the same legal form as that of the main company (e.g. both companies should be Public Limited Company). It is essential that a financial analyst should write out a well-organised and structured financial statements analysis report in an appropriate format and style to an identified user of accounting information, using headings and sub-headings to indicate topics discussed. This report should include the key groups of ratios, and identify the key issues, explanations, and main findings obtained from the calculated ratios, horizontal and vertical analyses, and other sources of information. Then, the analyst should come to appropriate conclusions, implications, limitations, and recommendations. A suggested approach to write a good report is demonstrated below. I. Abstract * Report Objective; * Main Findings. II. Summary of the Basic Company Information Before looking at any of the different analysis techniques, it is good to spend some time doing a little bit of background research...
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...Introduction: Financial Statement Analysis is used by interested parties such as inventors, creditors, and management to evaluate the past, current and projected condition and performance of the firm. Its analysis helps user make better desiccations. Ration analysis is the most common form of financial analysis. It provides relative measures of the firm’s conditions and performance. Horizontal analysis and Vertical analysis are also popular forms. Horizontal analysis is used to evaluate the trend in the accounts over the years, while vertical analysis, also called a common size Financial Statement discloses the internal structure of the firm. It indicates the existing relationship between sales and each income statement account. It shows the mix of assets debt that produces income and the mix of the sources of capital, where by current or long-term debt of by equity funding. Financial Statement Analysis prepared for the internal auditors, Many different financial measures are used to analyze financial statements and rank the performance of competing investment opportunities, including growth in sales, return to stockholders, profit margin, and return on equity. These are just four possible measures considered and evaluated by investors and creditors. Financial statements presented in various formats to help facilitate analysis. A classified set of financial statements groups items with similar characteristics together. Groupings include categories such as current assets; property...
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...Business Analysis & Valuation Project The objective of this project is to apply financial statement analysis techniques in a typical (equity) investment decision-making context. You should assume that you are required to make an investment recommendation to a fund manager. The fund manger wishes to add a stock to a diversified portfolio. The investment manager has a strategy of maximizing investor returns over the long term. Consistent with the course objectives, the project is an essential part of the course and aimed at developing your understanding of, and practical skills in financial statement analysis and valuation. It is also designed to enhance teamwork, and analytical and communication skills. To maximize the benefits of the project, you are required to progressively complete the project as the techniques are examined in the course. The project comprises two components: (1) an industry and company analysis, (2) a detailed project report, and Getting Started (Weeks 1-2) By the end of Week 2 you are required to: (1) Form groups of ideally 4 or 5 members. For part-time students who have difficulties in finding common free time for group meetings, groups of 2 or 3 are acceptable. (2) Select a company that is listed on the Australian Securities Exchange (ASX). Your companies must have at least three years of annual reports available – it is your responsibility to pick a company with the required information available); (3) Enroll your group members online through Blackboard...
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...2 Graduate Thesis By Teia R. Merring Copenhagen Business School Strategic and financial analysis and valuation of B&O 0 1 Executive Summary................................................................................2 Introduction............................................................................................6 1.1Motivation.................................................................................................................. 6 1.2Problem Specification................................................................................................ 8 1.3Problem Identification................................................................................................ 8 1.4Problem Handling .................................................................................................... 10 1.5Structure and Methodology...................................................................................... 12 1.5.1Introduction and Presentation........................................................................... 12 1.5.2Strategic Analysis............................................................................................. 12 1.5.3Financial Statement Analysis ........................................................................... 13 1.5.4Prognoses and Budgets..................................................................................... 14 1.5.5Valuation.......................................
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... Spring 2014 T TH Financial Analysis and Management Dr. Kamal M. Haddad COURSE OBJECTIVES Fin 423 is designed to develop critical thinking at the individual level, and problem solving competencies at both the individual and group levels. Teamwork and group problem solving are stressed. The course provides a thorough overview of financial analysis, including relevant modern theory and practical applications. Topics include financial statement analysis, financial planning, principles of valuation, capital budgeting, capital structure, and issues in financial policy. The course gives students opportunities to apply financial theory to analyze real life situations in an uncertain environment with an incomplete data set. It is integrative in nature, with special attention to the integration of theory and managerial judgment in the process of making financial decisions. BSBA Goals BSBA students will graduate being Effective Communicators, Critical Thinkers, Able to Analyze Ethical Problems, Global in their perspective, and Knowledgeable about the essentials of business. This class contributes to those goals through its student learning outcomes. LEARNING OBJECTIVES * Use Financial Statements to evaluate firm performance. * Project Financial Statements (B/S, I/S, budgets, etc.). * Use Financial Statements to obtain Cash Flows for the...
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...University of Phoenix November 7, 2011 Kevin Wilhelmsen Merck’s Business Environment There are many factors a business, such as Merck, must have in order to be successful, for example strong financial statements, leading technology, and globalization. With the help of income statements, balance sheets, and cash flow statements, a financial analysis can be applied in a wide variety of situations to give business managers the information they need to make critical decisions (Financial Analysis, 2010). They also provide information in regards to the financial health of a company. Pharmaceutical companies are using technology to conduct clinical trials, which has proven to be beneficial to research, development, and the introduction of new products. Globalization is also important for Merck when it comes to product distribution. Outsourcing was been adopted by Merck in order to produce equal quality vaccines and medications at a cheaper cost. Review of Finances Analyzing a company’s income statement, balance sheet, and cash flow is a prime way in determining their success. A comparison can be made between the competition in the industry and a leader can be established. An analysis can also show which company is spending more on research and development and in turn, producing better products. After review of the income statements, Merck’s worldwide sales were $12 billion for the third quarter this year, an increase of...
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...and Trend Analysis on WALMART Stores Inc. The tenth tab in your Financial Statement Analysis Template must be labeled Common Sized Balance SheetsThe eleventh tab in your Financial Statement Analysis Template must be labeled Common Sized Income StatementsThe twelfth tab in your Financial Statement Analysis Template must be labeled Horizontal Analysis of Balance SheetsThe thirteenth tab in your Financial Statement Analysis Template must be labeled Horizontal Analysis of Income StatementsInclude the latest three years for the common sized (vertical analysis) and horizontal analysis in Tabs 10–13. *PLEASE WORK OFF OF ATTACHED EXCEL SPREADSHEET. When you open the document, you will see that there are already 9 tabs. Follow the instructions above. You will need to add 4 more tabs labeled appropriately with the above titles (see instructions). Please save the work and send it back to me. PART 2: - Use WORD to complete this part COMPARITIVE ANALYSIS REPORT. - WALMART Examine common sized financial statements and ratios for the company you selected for the Excel project and two of its competitors. Write a 1000-word report in current APA format. Include the following in your report: Compare and contrast the selected company, its competitors, and industry averages Identify the selected company’s strengths and weaknesses and examine the implications for financial statement analysis and future projections. Compute ROA and ROCE and examine the selected company’s financial leverage...
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...Group Work: Financial Statement Analysis of your selected listed Bangladeshi company Guideline for Term Paper Dear All, Please complete the strategy analysis and accounting analysis based on the following guideline by next 2 weeks for the company allocated to your group for term paper, and give me the update. Topic Specific Topics Key Questions Strategy Analysis Industry Analysis (Five forces Model) Rivalry -How do firms in an industry rivalry compete among themselves? -What are the dimensions of the competition? Threat of new entrants -What are the legal entry barriers for a new firm? -What are the economic entry barriers for a new firm? Threat of substitute products -Is there any substitute products of the industry? -If so, What is the level of price difference with substitute product? Bargaining power of buyers -What is level of buyers’ price sensitivity? -What is the buyers’ relative bargaining power? Bargaining power of suppliers -How many numbers of suppliers? -How much critical the product is to buyers? Competitive Strategy Analysis Which competitive strategy the company has taken? Cost leadership or Differentiation Corporate Strategy Analysis -Are there significant imperfections in the product, labor or financial markets in the industry in which the company is operating? - Does the company have special resources such as brand names, proprietary know how, access to scarce distribution channels, and special organization...
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...INTRODUCTION TO ACCOUNTING & FINANCE In this report, we will analyze the financial performance of two companies: Kraft and General Mills. They are global consumer foods companies that develop different packaged food products. The main goals of these companies are to meet consumers' needs and preferences while generating superior returns by delivering consistent growth in sales and earnings, coupled with an attractive dividend yield. This report shows how each company meets their goals and which one is in better standing. The report will give an overview of each company, an explanation of what type of companies we are analyzing, the purpose of each company in terms of its goals and objectives, the products and services each company produces, and what future prospects we see these companies having. The reader should gain an understanding of each company as well. We also analyze the type of industry these companies are competing in. This will help us understand where each company fits in the marketplace. This is important because it places the two companies into a broader picture. The most important part of the financial report is the financial statement analysis. In this, the annual report of each company was analyzed. It studies the firms' past earnings to understand their operating performances. It also forecasts future profitability and risk (short-term and long term). The financial statements give information on how these risks affect expected return. ...
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