1 / 26

Understanding Financial Statements & Analysis

Lecture Series #1. Understanding Financial Statements & Analysis. Chris Droussiotis October 2011. Table of Contents. Accounting Definitions, Terms and Concepts Using Financial Statements Financial Ratio Analysis.

paulbailey
Télécharger la présentation

Understanding Financial Statements & Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Lecture Series #1 Understanding Financial Statements & Analysis Chris Droussiotis October 2011

  2. Table of Contents • Accounting Definitions, Terms and Concepts • Using Financial Statements • Financial Ratio Analysis These slides could be obtain via the Instructor’s Web page at www.celeritymoment.com

  3. Accounting Definitions and Concepts A = L + NW A = Assets L = Liabilities NW = Net Worth Own Owe Keep (Value Creation) • Government • Deficit or Surplus How did you pay for the Assets that you own • Similar Concepts in Other Areas of Finance: • Consumer finance: Value of the House = Mortgage + Equity • Corporation Value: Enterprise Value = Net Debt + Equity • Investments: Value of the Investment: Margin Loan + Equity

  4. Accounting Definitions and Concepts Book Value Vs Market Value • Book Value • Accounting • Fixed Assets • Corporate Taxation • Market Value • Finance • Financial Assets • Investment Taxation

  5. Accounting Definitions and Concepts Income Vs Cash The Perfect World: Every business is run like a lemonade Stand

  6. Accounting Definitions and Concepts Income Vs Cash Not So Perfect World: The world of IOUs

  7. Income Statement • Measurement of Profit and Loss over a Period of Time • Top Line to Bottom Line • Revenue (Sales) Less Expenses = Profit or Loss

  8. Income Statement

  9. Balance Sheet Statement • It shows us on a snap shot the Wealth of the Company • The statement is set-up in Order of Liquidity

  10. Balance Sheet Statement

  11. Cash Flow Statement • It shows the Company’s Cash Inflow and Outflow over a period of time • Differences between Income Statement and Cash Flow Statement • Timing Differences (Working Capital Activities) • Capital Expenses Vs Operating Expenses (Investment Activities) • Financing Expenses not included in the Income Statement (Financing Activities) • Represents the changes from last Year’s Balance Sheet to this Year’s Balance Sheet • Asset goes Up = Cash Negative • Asset goes down = Cash Positive • Liability goes up = Cash Positive • Liability goes down = Cash Negative • Owner’s Equity goes up = Cash Positive • Owner’s Equity goes down = Cash Negative

  12. Cash Flow Statement Adjusting Income to Cash

  13. Cash Flow Statement Working Capital Activities

  14. Cash Flow Statement Investment Activities

  15. Cash Flow Statement Financing Activities

  16. Cash Flow Statement Recap Timing Differences (Working Capital Activities) Investment Activities Financing Activities

  17. Financial Analysis • Management Discussion and Analysis (MD&A) • Equity & Bond Research – Wall Street Analysts • The Financial Statements could be used by analysts to project the Company’s performance and valuation • For an effective performance of the Company, you need to ask the three following questions: • How is the Company doing versus Last Year • How is the Company doing versus its competitors / piers/ market • How is the Company doing versus expectations

  18. Financial Ratio Analysis • Trend Analysis

  19. Financial Ratio Analysis • Liquidity Ratio • How well the Company manages Cash

  20. Financial Ratio Analysis • Solvency Ratio • How well the Company manages Debt

  21. Financial Ratio Analysis • Activity and Operating Ratios • It measures productivity and efficiency for running the business Please note that there are a lot of ratios establish by specialization (i.e. for a Hotel company is Occupancy Rate or for a Cable company is revenue per subscriber)

  22. Financial Ratio Analysis • Profitability Ratio • How profitable is the company

  23. Income Statement – Publicly Traded Company

  24. Balance Sheet – Publicly Traded Company

  25. Cash Flow Statement – Publicly Traded Company

  26. Ratio Analysis – Publicly Traded Company

More Related