Financial Analysis in Financial Management

Financial analysis in financial management

1. FINANCIAL ANALYSIS DPE 304: Financial Management Engr. JOEL C. VILLARUZ, PhD Course Facilitator CRISTIAN V. CAPAPAS Discussant

2. WHAT IS FINANCIAL ANALYSIS? refers to an assessment of viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios and other techniques, that make use of information taken from financial statements and other reports.

3. Moreover… A it is used to find financial stability, evaluate economic trends, financial policy making for the long term, and evaluation of business in order to determine its profitability, sustainability, and strength of earning potential.

4. In addition… Financial Analysis is an essential part of all commercial operations as it litigable insights into the health and capacity of the organization in the future.

5. From the perspective of the management… Financial Analysis is essential for the advancement of the company as it shed light on the strengths as well as the weaknesses which in turn directly impact competitiveness.

6. Common Ways to Analyze Financial Data: Calculating ratios from financial statements; Comparing these ratios to historical data of organizations or other competitor companies.

7. Financial Analysts often Assess the following Elements of a Firm: PROFITABILITY- its ability to earn income and sustain growth in both the short- and long-term. A company’s degree of profitability is usually based on the income statement, which reports on the company’s results of operations.

8. Financial Analysts often Assess the following Elements of a Firm: SOLVENCY- its ability to pay its obligation to creditors and other third parties in the long-term;

9. Financial Analysts often Assess the following Elements of a Firm: LIQUIDITY- its ability to maintain positive cashflow, while satisfying immediate obligations;

10. Financial Analysts often Assess the following Elements of a Firm: STABILITY- the firm’s ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company’s stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators.

11. There are Two Types of Financial Analysis: Fundamental Analysis Technical Analysis

12. FUNDAMENTAL ANALYSIS Name: 0001 The fundamental analysis gives you the perspective of a company’s intrinsic value by examining related economic and financial factors. It is a technique that gives you a better conviction to identify companies for long term investment and create wealth. DEFINITION:

13. There are Two Types of Fundamental Analysis: Qualitative Analysis Quantitative Analysis

14. TYPES OF FUNDAMENTAL ANALYSIS: Name: 0001 It includes the quality of company’s executives, vision, brand-name recognition, patents and proprietary information/ technology. Generally, it is related to the nature of business and standard of organization rather than sticking to its quantity. QUALITATIVE ANALYSIS

15. TYPES OF FUNDAMENTAL ANALYSIS: Name: 0001 Quantitative analysis of financial statements is used to understand a company’s financial performance better before making an investment decision. The three most important financial statements being used for quantitative analysis are: income statements, balance sheets and cash flow statements. QUANTITATIVE ANALYSIS

16. TECHNICAL ANALYSIS Name: 0001 Analysts evaluate the investment opportunities by analyzing past statistical trends such as volume and price. Technical analysts assume that prices of the stock are more likely to follow the past trend rather than move strangely. DEFINITION:

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