FINANCIAL ANALYSIS

AND ACCOUNTING
BASICS IN
TECHNOPRENEURSHIP
ES 311:
TECHNOPRENEURSHIP 101
In technopreneurship, accounting
basics and financial analysis are
essential tools for evaluating the
success and feasibility of
technology-based businesses.
.

FINANCIAL ANALYSIS
- the process of evaluating businesses,
projects, budgets, and other finance-related
transactions to determine their performance
and suitability. Typically, financial analysis is
used to analyze whether an entity is stable,
solvent, liquid, or profitable enough to
warrant a monetary investment (Touvilla,
2023).
.

FINANCIAL ANALYSIS
 Analyzing financial statements to assess a company's profitability,
stability, and performance.
 Aids in assessing the technopreneurial venture's performance and
financial standing.
 Allows financial indicators to be compared with competitors and
industry norms.
 Aids in making decisions about expansion, investments, and
strategic changes.
 Offers information on cash flow management, profitability, cost
structures, and revenue streams.
 Directs budgeting and resource allocation to maximize financial
results.
TYPES OF FINANCIAL
ANALYSIS
1. Fundamental analysis
 uses ratios gathered from data within the financial statements, such as a company's
earnings per share (EPS), in order to determine the business's value.
 measures a security’s intrinsic value by examining related economic and financial
factors. Intrinsic value is the value of an investment based on the issuing company's
financial situation and current market and economic conditions.

Types of Fundamental Analysis

• Quantitative: information that can be shown using numbers, figures, ratios, or
formulas (e.g. revenue, profit, and assets)
• Qualitative: rather than a quantity of something, it is its quality, standard, or nature
(e.g. quality of a company's key executives, brand-name recognition, patents, and
proprietary technology)
TYPES OF FINANCIAL
ANALYSIS
2. Technical analysis
 uses statistical trends gathered from trading activity, such as
moving averages (MA).
 attempts to understand the market sentiment behind price trends by
looking for patterns and trends rather than analyzing a security’s
fundamental attributes.
 differs from fundamental analysis in that the stock's price and volume are
the only inputs. The core assumption is that all known fundamentals are
factored into price; thus, there is no need to pay close attention to them.
Technical analysts do not attempt to measure a security's intrinsic value,
but instead, use stock charts to identify patterns and trends that suggest
what a stock will do in the future.
KEY COMPONENTS OF
FINANCIAL ANALYSIS
1. Financial Statements
2. Financial Ratio
3. Trend Analysis
4. Comparative Analysis
5. Risk Analysis
6. Qualitative Factors
7. External Factors
KEY COMPONENTS OF
FINANCIAL ANALYSIS
1. Financial Statements
provide a snapshot of
the enterprise’s
financial performance
and position. It offer
valuable insights into
revenue, expenses,
assets, liabilities, and
cash flows.
KEY COMPONENTS OF
FINANCIAL ANALYSIS
1. Financial Statements
• Income Statement: The income statement summarizes the enterprise’s
revenues, expenses, and net income or loss over a specific period, providing
insights into profitability and operational performance.
• Balance Sheet: The balance sheet presents the enterprise’s assets, liabilities,
and shareholder’s equity at a given time, offering a snapshot of its financial
position.
• Cash Flow Statement: A cash flow statement monitors the inflows and
outflows of cash, allowing to identify and monitor the sources and uses of cash
within the enterprise.
• Statement of Shareholders’ Equity: The shareholders’ equity statement
outlines the shareholders’ equity changes over a period. It includes net income,
dividends, and equity transactions, providing insights into the ownership
 KEY COMPONENTS OF
2.FINANCIAL ANALYSIS
Financial Ratio Analysis
 a powerful tool as it helps evaluate the enterprise’s financial health. It also provide a clear
picture of the enterprise’s financial position and assist in identifying areas for improvement,
optimizing resources, and mitigating risk

• Liquidity Ratios: the current and quick ratios, assess the enterprise’s ability to meet short-term
obligations and provide insights into its liquidity and cash flow position.
• Solvency Ratios: includes the debt-to-equity ratio and interest coverage ratio, evaluate the
enterprise’s long-term financial viability and ability to meet long-term obligations and interest
payments.
• Profitability Ratios: such as gross profit margin and return on investment (ROI or rate of
return), measure the enterprise’s profitability and effectiveness in generating profits from its
operations.
• Efficiency Ratios: like inventory and accounts receivable turnover, it evaluate how efficiently
the enterprise utilizes its assets and manages its resources to generate sales and collect
payments.
KEY COMPONENTS OF
FINANCIAL ANALYSIS
3. Trend Analysis
 involves examining past data to identify patterns and trends in the enterprise’s
financial performance. Comparing and analyzing data from multiple periods
allows to look at changes, growth rates, and shifts in key financial metrics.
 helps understand the direction and magnitude of changes in areas such as
revenue, expenses, profitability, and liquidity. Trend analysis enables to
identify emerging opportunities, detect potential risks, and make informed
decisions based on historical patterns and future projections.
 it also provides valuable insights into the enterprise’s performance trajectory
and helps guide strategic planning and resource allocation.
KEY COMPONENTS OF
FINANCIAL ANALYSIS
4. Comparative Analysis
 involves comparing the enterprise’s financial data with that of
similar companies or industry benchmarks. The reasons could be to
gain insights into performance, identify areas of strength or
weakness, or other specific purposes.
 assess how enterprise fares against competitors or industry
standards. Any comparative analysis helps benchmark performance,
identify best practices, and make informed decisions for
improvement.
 it provides a context to evaluate the enterprise’s relative position,
competitive advantage, and areas for potential growth or
optimization.
KEY COMPONENTS OF
FINANCIAL ANALYSIS
5. Risk Analysis
 assess and evaluate potential risks that may impact the enterprise’s
financial stability, operations, or strategic objectives. It entails identifying
and analyzing various risk factors, such as market volatility, economic
conditions, regulatory changes, and internal vulnerabilities.
 a comprehensive risk analysis will tell you about the likelihood and
potential impact of these risks. You can then prioritize them based on their
significance and develop effective risk management strategies.
 helps proactively mitigate risks, make informed decisions, and safeguard
the enterprise’s financial well-being. It enables to navigate uncertainties,
protect assets, and ensure resilience in an ever-changing business
landscape.
KEY COMPONENTS OF
FINANCIAL ANALYSIS
6. Qualitative Factors
 are non-financial considerations that impact the enterprise’s performance and
decision-making processes. They include aspects such as brand reputation,
customer satisfaction, employee morale, market trends, and regulatory
environment.
 these factors are subjective and not easily quantifiable. However, they are critical
in shaping the enterprise’s success. Qualitative factors provide insights into the
overall health and perception of the business, influence customer loyalty, affect
employee productivity, and can impact long-term sustainability.
 considering qualitative factors alongside quantitative data allows for a more
holistic assessment and aids in making well-rounded and informed business
decisions.
KEY COMPONENTS OF
FINANCIAL ANALYSIS
7. External Factors
 exist outside the enterprise’s control but directly or indirectly impact its
operations, performance, and decision-making processes. These factors include
market conditions, economic trends, technological advancements, regulatory
changes, competition, and socio-political factors.
 often shape the business environment in which the enterprise operates and
influence its opportunities, risks, and overall success.
 understanding and monitoring external factors is crucial to adapt to changing
circumstances, identifying emerging trends, and making strategic decisions that
align with the external landscape to ensure sustainable growth and
competitiveness.
IMPORTANCE OF FINANCIAL ANALYSIS
IN TECHNOPRENEURSHIP
 aids technopreneurs in seeing trends, evaluating the financial
health of their company, and coming to wise conclusions.
 making better, more strategic judgments based on a company's
underlying financial facts requires financial analysis as a
foundation. Analysts employ data to investigate patterns,
comprehend growth, identify risk areas, and aid in decision-
making, whether they specialize in technical, business, or
investment analysis. Investigating changes in financial
statements, computing financial ratios, or looking at operating
variances are some examples of financial analysis.
ACCOUNTING BASICS
 Accounting is commonly known as the "language of
business". It is a means through which information about a
business entity is communicated. Through the financial
statements – the end-product reports in accounting – it
delivers information to different users to help them in making
decisions.
 Accounting processes summarizes, evaluates, and reports
transactions to regulatory bodies, tax collecting
organizations, and oversight agencies. The information that is
produced gives management a crucial feedback loop that
allows them to assess how well a company is doing in
comparison to their expectations.
.

ACCOUNTING BASICS
 Creates the foundation for correctly and openly documenting
and reporting financial transactions.
 Verifies adherence to tax laws, regulations, and accounting
standards.
 Makes it easier to prepare financial statements.
 Aids in the tracking of revenue, costs, equity, liabilities, and
assets.
 Offers a foundation for evaluating financial performance,
pinpointing opportunities for development, and formulating
well-informed company decisions.
PRIMARY ACCOUNT
CATEGORIES
• Assets - These are items purchased or acquired, but not immediately
consumed. Examples are accounts receivable and inventory.
• Liabilities - These are obligations of the business, to be paid at a later
date. Examples are accounts payable and loans payable.
• Equity - This is assets minus liabilities, and represents the ownership
interest of the owners of the business. Examples are common stock and
preferred stock.
• Revenue - This is the amount billed to customers in exchange for the
delivery of goods or provision of services.
• Expenses - This is the amount of assets consumed during the
measurement period. Examples are rent expense and wages expense.
TYPES OF ACCOUNTING
BASICS
1.

Financial Accounting
refers to the processes used to generate interim and annual financial statements.
The results of all financial transactions that occur during an accounting period
are summarized in the balance sheet, income statement, and cash flow statement.
 it involves recording and classifying business transactions, and preparing and
presenting financial statements to be used by internal and external users.

2. Managerial Accounting
 uses much of the same data as financial accounting, but it organizes and utilizes
information in different ways. In managerial accounting, an accountant generates
monthly or quarterly reports that a business's management team can use to make
decisions about how the business operates. It also encompasses many other facets
of accounting, including budgeting, forecasting, and various financial analysis
tools.
 TYPES OF ACCOUNTING
BASICS
3. Cost Accounting
 Cost accounting helps businesses make decisions about costing. Essentially, cost
accounting considers all of the costs related to producing a product. Analysts,
managers, business owners, and accountants use this information to determine
what their products should cost. In cost accounting, money is cast as an economic
factor in production, whereas in financial accounting, money is considered to be a
measure of a company's economic performance.
4. Tax Accounting
 Tax accountants often use a different set of rules. These rules are set at the federal,
state, or local level based on what return is being filed. Tax accounts balance
compliance with reporting rules while also attempting to minimize a company's
tax liability through thoughtful strategic decision-making. It often oversees the
entire tax process of a company: the strategic creation of the organization chart,
the operations, the compliance, the reporting, and the remittance of tax liability.
IMPORTANCE OF ACCOUNTING BASIS
IN TECHNOPRENEURSHIP
The fundamentals of accounting lay the groundwork for
technopreneurship growth, compliance, solid financial
management, and decision-making. Technopreneurs
may improve the sustainability and performance of
their businesses in the competitive and ever-changing
technology-driven market by utilizing accounting
concepts efficiently.
GROUP 3 (BSCE & BSME)
AGERO, A. HIMARANGAN, L.M.
COTACTE, A. MANTILLA, F.
CURAY, J. PETALIO, M.V.
DAGUPLO, J.M. RABE, L.
GODES, R.J. TUMAOB, G.M.

Reference
s:
o Financial Analysis: Definition, Importance, Types, and Examples (investopedia.com)
o Financial Analysis: What is it, Types, Objectives, Limitations & Tools (happay.com)
o Basics of accounting — AccountingTools
o Accounting Explained With Brief History and Modern Job Requirements (investopedia.c