Financial Statement Analysis

Ernie Jane G. Villanueva

Project Description
Brief description of the project
 The numbers included in the income Statement
and the Balance Sheet will he broken down for
analysis

FINANCIAL RATIO
ANALYSIS
Users of financial Statement allows to
do two (2) things:
 1.Analyze the financial
performance of the firm overt ime.
 2.. Compare the performance of the
form which that of the other firm.
 Creditors are interested in the portion of the F. S that id
reflective of the firm's ability to pay its obligation booth
in the shor term and in the long term.

 Investors look into the firm's ability to earn a reasonable

rate of return on their investment.

 Manager of the firm are tasked to monitor the overall

financial well-being of the firm.

HORIZONTAL
AND
VERTICAL ANALYSIS
Horizontal Analysis-when a form
presents a comparison of F. I
normally reflected in F. S for two
years or more. Then, ito hells
users of F. S to see trends in the
F. P of a firm.
 VERTICAL ANALYSIS
when an item in F.S is used as
base and all other items are
compared to it
FINANCIAL RATIO
Liquidity Ratios-it measures the firm
ability to satisfy its short term obligation.
 Not liquid- increase of cost of
borrowing monet
 Too much liquid -lt is not good
 Liquid- able to satisfy
 NET WORKING CAPITAL. CURRENT RATIO

NWC=C. A-C. L C. R=C. A/C. L

NWC for year C. R for year

3=$124-$55 3=$124/$55
=$69.00 =$2.25
 QUICH RATIO OR ACID-TEST
Conclude:The
company is still
Q. R=C. A-INVENTORY/C. L liquid but
without the
inventory the
liquidity decrease
Q. R for year 3=$124-$50/$55 by minus
=$1.35
 ASSET UTILIZATION
RATIOS
measures the firms ability
to utilize its asset in order
to gain revenue and
eventually... PROFITS.
 ACCOUNTS RECEIVABLE TURNOVER RATIO
A R T=NETSALES/A. A. R Conclude
:Firm was
A. A. R=20+15/2=17.5 able to
collect its
A. R 6X in
A. R. T for year 3=110/17.5 year 3
=6.29
 ACCOUNTS COLLECTION PERIOD
 -The lenght of time it takes to collect receivable. It is to
expressed in number of day.

Conclude :It
A. C. P/A. R. T=365 days takes firm 58
days to
convert
receivable
A. C. P for year 3 =365/6.29=58
into cash
days
 INVENTORY TURN OVER RATIO
manager helps to monitoring inventory
ratios to manage inventory levels. Too
much inventory means that cash is tied up
in inventory. Not enough inventory,
however could result to look sales
opportunities.