Creating the great business leaders

Understanding Financial Statements

 Fakultas Ekonomi dan Bisnis
School of Economic and Business Financial Statements
Telkom University
Sundjaja (2004) :
“Laporan keuangan adalah suatu laporan yang menggambarkan hasil
dari proses akuntansi yang digunakan sebagai alat komunikasi antar
data keuangan/aktivitas perusahaan dengan pihak-pihak yang
berkepentingan dengan data-data/aktivitas tersebut”.

2 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business Income Statement/ Laporan Rugi Laba
Telkom University

• Profit/Loss Statement
• Indicates the amount of profits or loss generated by a firm over a
given period of time
• Sales – Expenses = Profit

3 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business Income Statement/ Laporan Rugi-Laba
Telkom University

OPERATING ACTIVITIES

FINANCING ACTIVITIES

6 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business Balance Sheet/ Neraca
Telkom University
Sundjaja (2004) :
“Laporan keuangan mengenai aktiva/ aset, hutang dan modal dari
suatu perusahaan pada suatu saat tertentu”.

TOTAL ASSETS = LIABILITIES + EQUITY

7 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business Balance Sheet/ Neraca
Telkom University
Assets Liabilities (Debt) & Equity
Current Assets Current Liabilities
Accounts Payable
Cash
Accrued Expenses
Marketable Securities Short-term notes
Accounts Receivable Long-Term Liabilities
Inventories Long-term notes
Mortgages
Prepaid Expenses
Fixed Assets Equity
Preferred Stock
Machinery & Equipment Common Stock (Par value)
Buildings and Land Paid in Capital
Retained Earnings
Other Assets
Investments & patents

8 Creating the great business leaders

 Creating the great business leaders

Evaluating a Firm’s Financial

Performances
 Fakultas Ekonomi dan Bisnis
School of Economic and Business Objectives :
Telkom University
• Calculate financial ratios to evaluate the financial health of a company.
• Explain the limitations of ratio analysis.
• Apply DuPont analysis in evaluating a firm’s financial performance.

10 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business How to use Financial Ratios?
Telkom University
• Compare across time for an individual firm. Trend Analysis.
• Compare to an industry average. Industry Analysis.
• Compare to a dominant competitor in the same industry. Comparison
Analysis.

11 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business 4 Key Questions to Answer with Ratio Analysis
Telkom University
• How liquid is the firm?
• How has the firm financing its assets ?
• How efficient has the firms management been in utilizing its assets to
generate sales?
• Has the firms earned adequate returns on its investments ?

12 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business Orange’s Balance Sheet ($000)
Telkom University
Assets: Liabilities & Equity:
Cash $2,540 Accounts payable 9,721
Marketable securities 1,800 Notes payable 8,500
Accounts receivable 18,320 Accrued taxes payable 3,200
Inventories 27,530 Other current liabilities 4,102
Total current assets 50,190 Total current liabilities 25,523
Plant and equipment 43,100 Long-term debt (bonds) 22,000
less accum deprec. (11,400) Total liabilities 47,523
Net plant & equip. 31,700
Common stock ($10 par) 13,000
Total assets 81,890 Paid in capital 10,000
Retained earnings 11,367
Total stockholders' equity 34,367

Total liabilities & equity 81,890

13 Creating the great business leaders
 Fakultas Ekonomi dan Bisnis
School of Economic and Business Orange’s Income Statement ($000)
Sales
(all credit)
Telkom University $ 112,760
Cost of Goods Sold (85,300)
Gross Profit 27,460
Operating Expenses:
Selling (6,540)
General & Administrative (9,400)
Total Operating Expenses (15,940)
Earning Before Interest and Taxes (EBIT) 11,520
Interest charges:
Interest on bank notes (850)
Interest on bonds (2,310)
Total Interest charges (3,160)
Earning Before Taxes (EBT) 8,360
Taxes (assume 40%) (3,344)
Net Income 5,016
14 Creating the great business leaders
 Fakultas Ekonomi dan Bisnis
School of Economic and Business How liquid is the firm? Liquidity Ratio
Telkom University
1. Current Ratio
Current assets
Current Ratio 
Current Liabilities

Kemampuan perusahaan untuk membayar utang lancar (current liabilities)

dengan aset lancar. Semakin besar semakin baik.
2. Acid-test Ratio
Current assets  inventories
Acid Test Ratio 
Current Liabilities

Kemampuan perusahaan untuk membayar utang lancar (current

liabilities) dengan aset yang paling lancar. Semakin besar semakin baik.

15 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business How liquid is the firm? Liquidity Ratio
Telkom University

3. Average Collection Period

Accounts Re ceivable
Average Collection Ratio 
Daily (credit ) sales

Rata-rata periode yang diperlukan untuk mengumpulkan piutang,

semakin cepat semakin baik.
4. Accounts Receivable Turnover
Credit sales
Accounts Re ceivable Ratio 
Accounts Re ceivables
Kemampuan perusahaan untuk melakukan penagihan utang. Semakin
besar semakin baik.

16 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business How liquid is the firm? Liquidity Ratios
Telkom University

5. Inventory Turnover
COGS
Inventory Turnover 
Inventory

Menggambarkan likuiditas relatif persediaan, seberapa banyak persediaan

mengalami perputaran. Semakin cepat semakin baik.

17 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business How is the firm financing its asset ? Capital Structure Rati
Telkom University
1. Debt Ratio
Total Debt
Debt Ratio 
Total Assets

Mengukur seberapa besar aset perusahaan yang dibiayai oleh utang.

Semakin kecil semakin baik.

2. Times Interest Earned (TIE)

Operating Income ( EBIT )

TIE 
Interest exp ense

Mengukur kemampuan perusahaan untuk membayar beban bunganya.

Semakin besar semakin baik.

18 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business

How efficient has the firms management been in utilizing

Telkom University

its assets to generate sales?

Asset management efficiency ratios
1. Total Assets Turnover (TATO)
Sales
TATO 
Total Assets

Mengukur seberapa efisien perusahaan menggunakan asetnya untuk

menghasilkan penjualan. Semakin besar semakin baik.

2. Fixed Assets Turnover

Sales
Fixed Assets Turnover 
Net Fixed Assets

Mengukur seberapa efisien penggunaan fixed asset untuk menghasilkan

penjualan. Semakin besar semakin baik.
19 Creating the great business leaders
 Fakultas Ekonomi dan Bisnis
School of Economic and Business

Has the firms earned adequate returns on its investments ?

Telkom University

Profitability Ratios

1. Operating Return on Investment (OIROI)

Operating Income
OIROI 
Total Assets

Mengukur efektivitas manajemen menggunakan aset untuk menghasilkan laba

operasional. Semakin besar semakin baik.
2. Operating Profit Margin (OPM)
Operating Income ( EBIT )
OPM 
Sales

Mengukur prosentase laba yang diperoleh setelah perusahaan membayar semua

beban produksinya. Semakin besar semakin baik.

20 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business

Has the firms earned adequate returns on its investments ?

Telkom University

Profitability Ratios

3. Net Profit Margin (NPM)

Net Income
NPM 
Sales
Mengukur netto laba per penjualan. Semakin besar semakin baik.

4. Return on Equity (ROE)

Net Income
ROE 
Total Common equity

Mengukur seberapa besar return yang bisa diperoleh oleh pemegang

saham. Semakin besar semakin baik.
21 Creating the great business leaders
 Fakultas Ekonomi dan Bisnis
School of Economic and Business

Has the firms earned adequate returns on its investments ?

Telkom University

Profitability Ratios

5. Gross Profit Margin (GPM)

Gross Pr ofit
GPM 
Re venue
Mengukur laba kotor per penjualan. Semakin besar semakin baik.

6. Return On Asset (ROA)

Net Income
ROA 
Total Assets

Mengukur kemampuan perusahaan menggunakan asetnya untuk

menghasilkan laba bersih. Semakin besar semakin baik.

22 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business Limitations of Ratio Analysis
Telkom University

• Different Accounting Practices.

• Sometimes hard to pick an industry for comparison.
• Seasonality in Operations.

23 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business

Telkom University

The DuPont Model

Brings together:

• Profitability
• Efficiency
• Leverage

24 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business

Telkom University

Net Total
Profit Asset Equity
ROE Multiplier
Margin Turnover
Net Income Net Income Sales Total Debt
= X 1 -
/
Total Equity Sales Total Assets Total Assets

Asset Usage
Profitability Efficiency
Leverage

25 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business DuPont System
Telkom University

ROE

1 – (Total Debt
ROA
/ Total Assets)

Net Profit Total Assets

Margin Turnover

Net Income Sales Sales Total Assets

26 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business

Telkom University

Terima kasih...

27 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School of Economic and Business

Telkom University Categories of Function Ratios Involved

Ratio
Liquidity ratios Measures the ability to satisfy Current ratio
short term obligation as they Quick ratio
come due

Activity Measures the speed with Average collection period

(liquidity) ratios which liquid assets are Average payment period
converted into sales or cash Inventory turnover
Total assets turnover

Debt ratios Indicates the amount of other Debt ratio

people’s money being used to Times interest earned ratio
generate profits Fixed-payment coverage ratio

Profitability Evaluate the firm’s profit with OIROI

ratios respect to a given level of ROI / ROA
sales or the owners ROE
investment Gross profit margin
Operating profit margin
Net profit margin

29 Creating the great business leaders