Financial Statement Analysis: Methods Overview
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![Page 1: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/1.jpg)
Financial Statement Analysis:
Methods Overview
Financial Statement Analysis:
Methods Overview
![Page 2: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/2.jpg)
I. Business Strategy Analysis
II. Accounting Analysis
III. Financial Analysis
IV. Prospective Analysis
• accrual accounting and economic reality
• evaluation of historical performance
• forward looking view of performance
•qualitative assessment of profit potential
![Page 3: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/3.jpg)
I. Business Strategy Analysis
II. Accounting Analysis
III. Financial Analysis
IV. Prospective Analysis
• accrual accounting and economic reality
• evaluation of historical performance
• forward looking view of performance
•qualitative assessment of profit potential
![Page 4: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/4.jpg)
a) Industry analysis
b) Competitive strategy analysis
a) Industry analysis
b) Competitive strategy analysis
I. Business Strategy Analysis:
a qualitative assessment of profit potential
![Page 5: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/5.jpg)
Industry Analysisexample: Porter’s 5 Forces
rivalry with existing firms threat of new entry new Products bargaining power of suppliers bargaining power of buyers
![Page 6: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/6.jpg)
a) Industry analysis
b) Competitive strategy analysis
a) Industry analysis
b) Competitive strategy analysis
I. Business Strategy Analysis:
a qualitative assessment of profit potential
![Page 7: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/7.jpg)
Competitive Strategy Analysis
product differentiation strategy
cost leadership strategy
niche strategy
![Page 8: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/8.jpg)
I. Business Strategy Analysis
II. Accounting Analysis
III. Financial Analysis
IV. Prospective Analysis
• accrual accounting and economic reality
• evaluation of historical performance
• forward looking view of performance
•qualitative assessment of profit potential
a) industry analysisb) firm strategy analysis
![Page 9: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/9.jpg)
a) evaluate accounting quality
b) understand managerial reporting discretion
consequences of accrual accounting
II. Accounting Analysis
![Page 10: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/10.jpg)
Accounting Analysis:evaluating accounting quality
Do the financial statements reflect economic reality?
what are the constraints?what are the sources of distortion?
GAAP regulation legal capital market auditors
![Page 11: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/11.jpg)
a) evaluate accounting quality
b) understand managerial reporting discretion
consequences of accrual accounting
Accounting Analysis
![Page 12: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/12.jpg)
Accounting Analysis:evaluating accounting quality
Do the financial statements reflect economic reality?
when do managers have incentives to reveal truth?
when do managers have incentive to obscure truth?
![Page 13: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/13.jpg)
I. Business Strategy Analysis
II. Accounting Analysis
III. Financial Analysis
IV. Prospective Analysis
a) accounting qualityb) managerial discretion
• evaluation of historical performance
• forward looking view of performance
•qualitative assessment of profit potential
a) industry analysisb) firm strategy analysis
![Page 14: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/14.jpg)
a) Ratio analysis
b) Cash flow analysis
a) Ratio analysis
b) Cash flow analysis
III. Financial Analysis
evaluation of historical performance
![Page 15: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/15.jpg)
Financial Analysis:evaluation of historical performance
Ratio Analysis
profitability: ROA, ROE
liquidity: working capital
turnover: asset turns
leverage: debt to equity
![Page 16: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/16.jpg)
a) Ratio analysis
b) Cash flow analysis
a) Ratio analysis
b) Cash flow analysis
Financial Analysis
evaluation of historical performance
![Page 17: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/17.jpg)
Cash flow analysis:
• is there sufficient cash to carry out plans?
• does the firm generate cash flow internally?
• borrowing profile: long and short matching?
![Page 18: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/18.jpg)
I. Business Strategy Analysis
II. Accounting Analysis
III. Financial Analysis
IV. Prospective Analysis
a) accounting qualityb) managerial discretion
• evaluation of historical performance
• forward looking view of performance
•qualitative assessment of profit potential
a) industry analysisb) firm strategy analysis
a) ratio analysisb) cash flow analysis
![Page 19: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/19.jpg)
a) Forecasting
b) Valuation
a) Forecasting
b) Valuation
Prospective Analysis
forward looking view of performance
![Page 20: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/20.jpg)
Prospective Analysis:forward looking view of performance
• benchmarks: behavior of inputs, aggregate data
• starting point: models, analysts, line by line
• comprehensive forecasts: I/S, B/S, CF
Forecasting
![Page 21: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/21.jpg)
a) Forecasting
b) Valuation
a) Forecasting
b) Valuation
Prospective Analysis
forward looking view of performance
![Page 22: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/22.jpg)
Prospective Analysis:forward looking view of performance
• DCF
• comparables, Multiples
• accounting based valuation
Valuation
![Page 23: Financial Statement Analysis: Methods Overview](https://reader033.fdocuments.in/reader033/viewer/2022061223/54c69df84a7959d9668b4589/html5/thumbnails/23.jpg)
I. Business Strategy Analysis
II. Accounting Analysis
III. Financial Analysis
IV. Prospective Analysis
a) accounting qualityb) managerial discretion
• evaluation of historical performance
• forward looking view of performance
•qualitative assessment of profit potential
a) industry analysisb) firm strategy analysis
a) ratio analysisb) cash flow analysis
a) forecasting
b) valuation