FINANCIAL

STATEMENTS
ANALYSIS
 Financial Statements
are reports that summarize the financial performance and position of a company.

MONEY (FINANCIAL REAOURCES)

Where it came from Where it is now

Where it went Where it is going

 ▪ Shareholders and Investors
▪ Management

Stakeholders ▪ Creditors/Lenders
▪ Employees
▪ Competitors
▪ Government
▪ Unions
▪ Vendors
▪ Rating Agencies
▪ Customer
▪ General Public
▪ Analysts
 Basic Financial Statements
01 02 03
STATEMENT OF STATEMENT OF FINANCIAL CASH FLOW STATEMENT
OPERATIONS POSITION
(Income Statement) (Balance Sheet)

04 05
STATEMENT OF NOTES TO FINANCIAL
CHANGES IN EQUITY STATEMENTS
01 Financial Performance
Income This report shows all revenues of the

Statement
company and all the expenses it incur
over a period of time.

Statement of Operations

SALES REVENUE – EXPENSES = NET INCOME

Financial Health
The company’s assets, liabilities, and
equity from the inception of the business
are summarized and presented in this
report.

02
Statement of
Financial Position
Balance Sheet
 ASSETS – LIABILITIES = EQUITY
What you own What you owe What you get

Loan | Rent | Utilities Retained Earnings

Machinery & Equipment | Cash |
Inventory | Marketable Securities
| Furniture and Fixture
It shows all the cash receipts (cash inflows)
and cash disbursements (cash outflows) of

03
the business.

Only those transactions that may affect cash

account will be included in this report.
Cash Flow
Cash Inflows
Statement

Cash Outflows
 Cash Flow Statement
Operating Activities Investing Activities Financing Activities

+ Net Income + Proceeds from Sale of Investments + Issue of New Capital

+ Depreciation + Proceeds from Sale of Assets + Issue of New Debt
+ Interest Receive from Loans - Purchase of Assets - Repayment of Debt
- Cash payment to Suppliers - Dividends Payments
- Income Tax Paid
This report accentuates changes made in the
equity investments of owners. It must
contain the following: Increase in net
income (or decrease due to net loss) during
the period, additional capital
contributions, withdrawals, and dividend
(profit sharing) distributions, if any.

04
Statement of
Changes in Equity
05
Notes to Financial
Statement
Footnotes

These are explanatory notes that provide

detailed information on the accounting
policies, disclosure of accounts and accounts
not presented in the financial statements,
and any additional information such as
contingent liabilities, contractual
commitments and non financial disclosures.
Full Disclosure Principle
 1.Not a Substitute of Judgement
2. Based on Past Data
3.Problem in Comparability
4. Reliability of Figures

Limitations of 5. Various methods of Accounting and

Financing
Financial Statement 6. Change in Accounting Methods

Analysis 7. Changes in the Value of Money

8. Limitations of the Tools Application for
Analysis
9. No Assessment of Managerial Ability
10. Change of Business Condition
 Is a method of reviewing and analyzing a company’s

Financial accounting reports (financial statements) to assess its

past, present or projected future performance and

Statement
condition.

Analysis
3 Broad Categories of Financial Analysis
 COMPARATIVE
TOOLS OF FINANCIAL STATEMENT
FS ANALYSIS

Analytical Tools COMMON-SIZE

FINANCIAL STATEMENT

in Financial
RATIO ANALYSIS
Analysis
CASH FLOW ANALYSIS
and; VALUATION
 Common-Size
Statements
Vertical Analysis focuses on the relationships
among financial statement items at a given point
in time. A common-size financial statement is a
vertical analysis in which each financial
statement item is expressed as a percentage

In balance sheet, all items usually are expressed

as a percentage of total assets.

In income statements, all items usually are

expressed as a percentage of sales.
 Peso and Percentage PESO
= Current Year
- Base Year
The Peso
amounts for last
Figure
Changes on Statements
CHANGE Figure year become the
“base” year
figures.

𝑷𝒆𝒔𝒐 𝑪𝒉𝒂𝒏𝒈𝒆
PERCENTAGE = x 100%
Horizontal Analysis (or Trend Analysis) shows the CHANGE 𝑩𝒂𝒔𝒆 𝒀𝒆𝒂𝒓 𝑭𝒊𝒈𝒖𝒓𝒆

changes between years in the financial data in both

Peso and percentage form.

Quantifying peso changes over time serves to

Trend Percentages
highlight the changes that are most the most
important economically. Trend percentages state several years’ financial data
in terms of a base year, which equals 100 percent
Quantifying percentage changes over time serves to
highlight the changes that are most the most unusual. TREND = 𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒀𝒆𝒂𝒓 𝑨𝒎𝒐𝒖𝒏𝒕 x
PERCENTAGE 100%
𝑩𝒂𝒔𝒆 𝒀𝒆𝒂𝒓 𝑨𝒎𝒐𝒖𝒏𝒕
 Ratio Analysis
Ratio analysis involves methods of
calculating and interpreting financial
ratios to analyze and monitor a firm’s
performance.

Financial ratios involve the use of

numerical values taken from both Income
Statement and Balance Sheet.
 Statement of Operations
Sales Revenue
Less: Cost of Goods Sold
Gross Profit
Less: Operating Expenses
Operating Profit/EBIT
Less: Interest & Taxes
Net Income/EACS
Statement of Financial Position

ASSETS
Current Assets
Fixed Assets or PPE
Other Assets

LIABILITIES
Current Liabilities
Long-term Debts

STOCKHOLDERS’ EQUITY
Liquidity Activity Stability Profitability Market
Ratios Ratios Ratios Ratios Ratios

Current Ratio Account Receivables Gross Profit Price/Earnings

Debt Ratio
Turnover Margin Ratio
Quick Ratio Average Collection Operating Profit
Debt/Equity Ratio Market/Book
Period Margin Ratio
Accounts Payable Times Interest Net Profit
Dividend Yield
Turnover Earned Ratio Margin
Average Earning Per Book Value Per
Payment Period Share Share
Return on
Inventory Turnover
Assets Price/Earnings
Average Age of Growth Ratio
Return on
Inventory
equity
Total Assets
Turnover
 Cashflow Analysis
A cash flow analysis determines a
company’s working capital—the amount
of money available to run business
operations and complete transactions.
That is calculated as current assets (cash
or near-cash assets, like notes
receivable) minus current liabilities
(liabilities due during the upcoming
accounting period).
 Valuation Analysis
Valuation analysis is important for investors
to estimate intrinsic values of company
shares in order to make better informed
investment decisions. Fair values of bond do
not deviate much, if at all, from intrinsic
values, but opportunities do arise occasionally
in the case of financial stress of a heavily
indebted company.

Valuation analysis is a useful tool for

comparing companies within the same sector
or estimating on an investment over a given
time period.
Use this for a photo caption.