Financial Statement Analysis
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Transcript of Financial Statement Analysis
Financial Statement Analysis Presentation
Annakae Wonder
Natoya Kelly
Shanae Brooks Alex Ellis
Companies in the Spot light Today
Sagicor Life Jamaica LimitedGuardian Holdings Limited
AGENDA Factors to consider in undertaking a comprehensive
analysis Valuation methodologies used in recording key
components of financial statements. Cash Flow statements Identifying audit opinion of companies and the information
they convey. Common size both company financial statements Ratio Analysis of both companies Forecasted balance sheet for both companies.
FACTORS TO BE CONSIDER FOR A COMPREHENSIVE ANALYSIS
• Economic characteristics
• Corporate strategies
• Accounting strategy
• Regulatory Framework
VALUATION METHODS USED IN RECORDING COMPONENTS OF FINANCIAL STATEMENTS
Valuation Methodologies Identified are as Follows:
•Historical Cost
• Fair Value
•Revenue Recognition
Statement of Cash Flow
The three main components noted of both company’s Statement of Cash Flow include
• The Operating activity
• The Investing activity
• The Financing activity
The Relationship of the Components
The Relationship of the components of Sagicor Life Jamaica
Guardian Holdings Statement of Cash Flow
• Guardian Holdings Limited gain most of its cash flow from
financing and operating activities which is used for investing
• Sagicor Life Jamaica limited gained most of its cash flow from
operating which is used for investing and to pay back its capital
providers.
Audit Opinion and Report
What audit opinion was used?The independent auditors of Sagicor Life Jamaica Limited and
Guardian Holdings limited both issued an unqualified audit
opinion which means there are no identified material
weaknesses and there have been no restrictions on the scope
of the auditor’s work.
Sagicor Life Jamaica Limited
Sagicor Life Jamaica Limited
2012 2011 2010
Sagicor Life Jamaica Limited
2012 2011 2010
Sagicor Life Jamaica Limited
Sagicor Life Jamaica Limited
2012 2011 2010
Guardian Holdings Limited
Guardian Holdings Limited
2012 2011 2010
Guardian Holdings Limited
Guardian Holdings Limited
Ratio Analysis
Return on Average Assets
Return on Average Assets - indicates what a company can do with what it possesses
ROAA = Net Income / Total Average Assets
Return on Average Assets
Sagicor Life Jamaica Limited – 4% or 0.04 : 1
Guardian Holdings Limited – 1% or 0.01 : 1
General Accident Insurance Company Limited- 8% or0.08 : 1
Return on Shareholders’ Equity Ratio
Return on Capital Employed - is a measure of the returns that
a business is achieving from the capital employed.
ROCE = Net Income – Preferred Stock dividends/ Average
Common Shareholders’ Equity.
Return on Shareholders’ Equity Ratio
Sagicor Life Jamaica Limited – 76% or 0.76:1
Guardian Holdings Limited – 13% or 0.13:1
General Accident Insurance Company – 19% or 0.19:1
Current Ratio
The current ratio indicates a company's ability to meet short-term debt
obligations. The current ratio measures whether or not a firm has
enough resources to pay its debts over the next 12 months. Potential
creditors use this ratio in determining whether or not to make short-
term loans.
• Current ratio = Current assets/ Current liabilities
Current Ratio
Sagicor Life Jamaica Limited – 126% or 1.26 : 1
Guardian Holdings Limited – 286% or 2.86 : 1
General Accident Insurance Company – 432% or 4.32 : 1
Liabilities to Shareholders’ Equity
It measures a company's ability to repay its obligations. If the ratio is
increasing, the company is being financed by creditors rather than from its
own financial sources which may be a dangerous trend. Lenders and investors
usually prefer low debt-to-equity ratios because their interests are better
protected in the event of a business decline. Thus, companies with high debt-
to-equity ratios may not be able to attract additional lending capital.
Liabilities to Shareholders’ Equity
Sagicor Life Jamaica Guardian Holdings Ltd General Accident0%
10%20%30%40%50%60%70%80%90%
100%
409%602%
203%
100% 100% 100%
Liabilities Equity
Liabilities to Assets Ratio
used to measure a company's financial risk by determining
how much of the company's assets have been financed by
debt.
Liabilities to Assets Ratio = Total Liabilities/ Total Assets
Liabilities to Assets Ratio
Sagicor Life Jamaica Limited – 80% or 0.8 : 1
Guardian Holdings Limited – 86% or 0.86: 1
General Accident Insurance Company – 67% or 0.67: 1
Forecasted Balance Sheet
Technique – Trend Analysis
Factors consideredInflation RateChanges in TaxationInterest Rate
Sagicor Life Jamaica Limited
Sagicor Life Jamaica Limited
Sagicor Life Jamaica Limited
Guardian Holdings Limited
Guardian Holdings Limited