FINANCIAL STATEMENTS ANALYSIS UNDER FSSMd. Mahabbat Hossain Faculty Member BIBM Phone: 01716373565

May 12, 2012

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FINANCIAL SPREAD SHEET (FSS): COMPARATIVE & COMMON SIZE ANALYSIS OF FS

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INTRODUCTIONFinancial statement analysis consists ofApplying analytical tools and techniques

To financial statements To obtain useful information To make decision.

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FS ANALYSISInvolves Evaluation Three Characteristics of a Company: 1. Its Liquidity 2. Its Solvency and 3. Its ProfitabilityMay 12, 2012 4

LIQUIDITYAbility to pay off Short-Term Obligations With the Current Assets Interested Group:

Short-term Creditors Bankers Suppliers

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PROFITABILITYAffects Liquidity Position Measure Operating Success and Ability to grow Interested Group:May 12, 2012

Creditors and Investors6

SOLVENCYMeasure Ability to Survive over Long Period of Time Provide Information about DebtPaying Ability Interested Group:May 12, 2012

Long-term Creditors and Stockholders7

COMPARISONComparison can be made on a number of different bases: 1. Intra-company Basis 2. Inter-company basis 3. Industry AverageMay 12, 2012 8

TOOLS OF FS ANALYSIS Horizontal Analysis Vertical Analysis Statement of Cash Flow. Ratio Analysis

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HORIZONTAL ANALYSIS

Intra-Company Comparison. Over the period of time. Trend Analysis

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VERTICAL ANALYSISCommon Size Analysis Expresses as a Percent of a Base Amount-

B/S Total I/S Net Sales

Intra-company & Inter-company Comparison.

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Tips for FSS analysisFinancial Spread Sheet (FSS) is a technique that helps to analyze financial statements. It is a customized excel program. There are two types of sheet; input sheet and output sheet. Two input sheet: one for balance sheet and other for income statement. Input sheet should be filled up from traditional financial statements.May 12, 2012 12

Tips for FSS analysisRecent year data should be presented in the most right-hand column. Four output sheets (B/S, I/S, Ratio and CFS) will be generated automatically. Prepaid expense should be treated as non-current asset. Fixed assets should be presented at cost price. Accumulated depreciation should be deducted from cost price of fixed assets.

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Tips for FSS analysisThe following assets (if any) should be excluded from assets and will be deducted the same amount from retained earnings: All intangible assets: Goodwill, patent, trademark, copyright, etc. Fictitious assets: P/L A/c debit balance or accumulated loss Deferred revenue expense: Preliminary expense, pre-operative cost, etc.May 12, 2012 14

Tips for FSS analysisThe current maturity portion of long term debt (CMLTD) should be included in current liabilities. Subordinated loan for directors will be presented under equity. Total depreciation should be presented separately and should not be included in COGS, administrative or selling expenses. To get a complete output we are to insert three years data.May 12, 2012 15

Now, Ratio Analysis

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