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2 ME Interpreting Fin Statements
2 ME Interpreting Fin Statements
FINANCIAL
MANAGEMENT
For Engineers
Interpreting Financial
Data
Analysing
Financial
Statements
Financial analysis is a
technique of examining
financial statements to
help the entrepreneur
analyse the financial
position and performance
of the business.
Analysing
Financial
Statements
The financial
statements (cash flow,
income statement and
balance sheet) will give
the us a relatively
complete financial
picture of the business.
Analysing
Financial
Statements
Liquidity
Liquidity Ratios
The difference between
the two, known as
working capital,
represents a safety net
that protects the business
from a financial disaster.
Profitability
Net profit margin = Net profit before tax
Sales
Inventory turnover
Activity Debtors turnover
Ratios Total assets turnover.
Inventory turnover = Cost of sales
Average inventory