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Financial Analysis: Types of Finance and Ratio Analysis

Learn about various types of finance sources, ratio analysis for financial statements, and definitions for income statement and balance sheet. Includes examples and sources like Venture Capital and MicroFinance.

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Financial Analysis: Types of Finance and Ratio Analysis

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  1. Buzz Ventures Ratio Analysis Types of Finance Definitions: http://www.accountrain.com/definitions.html Financial Statements from SEDAR www.sedar.com/issuers/company_issuers_a_en.htm Financial Analysis for Trainee Millionaires

  2. Income Statement & Balance Sheet • Income Statement • Aka Profit and Loss Account, it has two sections: Revenue (or Income) and Expenses. • Income – Expenses = Profit • Profit can be added to the Retained Earnings section of the Balance Sheet and/or distributed directly to the shareholders as a Dividend payment • Balance Sheet • consists of two sections: Assets and Liabilities • A = L • Assets can be Fixed or Current • Liability can be LT, Current or Equity

  3. Aastra Technologies Limited www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00001712 • FISCAL 2011 FINANCIAL HIGHLIGHTS • ACHIEVED SALES OF $693.0 MILLION. • CLOSED THE YEAR WITH 55 CONSECUTIVE QUARTERS OF PROFITABILITY. • GENERATED $70.4 MILLION OF CASH FLOW FROM OPERATIONS. • CLOSED THE YEAR WITH $134.1 MILLION IN CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

  4. Aastra Annual Balance Sheets 2011, 2010, 2009

  5. Aastra Annual Income Statements

  6. Worked Examples • Use the spreadsheet Aastra Financials 2011.xls • Follow the demonstration of a ratio analysis for 2011 as it is demonstrated. • THEN practice by doing the same ratio analysis for 2010.

  7. Ratio Analysis • Useful with comparisons of results for the same company down time. • Very useful when comparing one company with its competitors OR with the industry. • BUT you will need to adjust each set of accounts to use the same accounting assumptions or systems.

  8. Sources of Finance • Angel Investors • Friends • Family • Fools • Early stage to Very early stage investment. • Exit Strategy • Dorm room to Board Room to an IPO in 7 years.

  9. Venture Capital • Expect 15 times return on investments ON AVERAGE. • Pressure to perform • Will take majority shareholding (allows control) • Ruthless

  10. Bank Loans • Will almost always ask for a personal guarantee of a business loan. • If the company defaults they may sell your home. • High interest charge but no share in the profits • Need to see growth in sales income over time.

  11. MicroFinance • Canadian Youth Business Foundation • Up to $25,000 loan • Low interest rates. • Provide mentoring & support • Can be matched with a $25,000 loan from BDC.

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