ACCOUNTINGACCOUNTING

FINANCIAL REPORT ANALYSISFINANCIAL REPORT ANALYSIS

THE AIM:THE AIM:

After conducting the financial report, the After conducting the financial report, the company should know how well and how company should know how well and how effective, efficient company’s performance in effective, efficient company’s performance in certain period of time. Moreover, the decision certain period of time. Moreover, the decision of the stockholders will be more accurate if it of the stockholders will be more accurate if it is based on the financial report analysis.is based on the financial report analysis.

It is done by analyzing the financial report. It is done by analyzing the financial report. Some financial ratios are counted as base of Some financial ratios are counted as base of financial report analysis.financial report analysis.

FINANCIAL REPORT ANALYSIS FINANCIAL REPORT ANALYSIS RATIOS:RATIOS:

Liquidity/Current RatioLiquidity/Current Ratio Solvability/Debt Equity RatioSolvability/Debt Equity Ratio Rentability Ratios:Rentability Ratios:

Return On Assets (ROA)Return On Assets (ROA) Return On Equity (ROE)Return On Equity (ROE)

The result must be compared with the average ratio of other companies in the industry.

Liquidity/Current RatioLiquidity/Current Ratio

Liquidity/current ratio is conducted to know how well Liquidity/current ratio is conducted to know how well the company can fulfill their short-term debt. the company can fulfill their short-term debt.

It is calculated by comparing the current assets with It is calculated by comparing the current assets with the short-term debt multiplied by 100%.the short-term debt multiplied by 100%.

Current Assets Current Assets x 100%x 100%

Short-term debtShort-term debt

The The higherhigher the result, the better company’s performance the result, the better company’s performance will be. The company can guarantee that they will will be. The company can guarantee that they will fulfill their short-term debt.fulfill their short-term debt.

Solvability/Debt Equity RatioSolvability/Debt Equity Ratio

Solvability/Debt Equity Ratio is conducted to know Solvability/Debt Equity Ratio is conducted to know how well the company can fulfill their all their debt, how well the company can fulfill their all their debt, even the company is going to bankrupt.even the company is going to bankrupt.

It is calculated by comparing the total debts with the It is calculated by comparing the total debts with the total assets multiplied by 100%.total assets multiplied by 100%.Total Debts Total Debts x 100%x 100%Total AssetsTotal Assets

The The smallersmaller the result, the better company’s the result, the better company’s performance will be. The company can guarantee that performance will be. The company can guarantee that they will fulfill all their debt.they will fulfill all their debt.

Rentability RatioRentability Ratio Rentability Ratio is conducted to know how well the company’s Rentability Ratio is conducted to know how well the company’s

performance to produce the profit sales.performance to produce the profit sales. Rentability ratio has two kinds of ratio:Rentability ratio has two kinds of ratio:

Return on Assets (ROA). It is calculated by comparing the profit Return on Assets (ROA). It is calculated by comparing the profit sales with the total assets multiplied by 100%.sales with the total assets multiplied by 100%.

Profit Sales Profit Sales x 100%x 100%Total AssetsTotal Assets

Return on Equity (ROE). It is calculated by comparing the profit Return on Equity (ROE). It is calculated by comparing the profit sales with the total equity multiplied by 100%.sales with the total equity multiplied by 100%.

Profit Sales Profit Sales x 100%x 100%Total EquityTotal Equity

The The higherhigher the result, the better company’s performance to produce the result, the better company’s performance to produce profit sales. profit sales.