合肥工业大学财务管理原理双语课件Chapter6 Financial Statement Analysis.ppt

chapter 6 Chapter 6: Financial Statement Analysis Study objectives Review financial statements A possible framework for analysis Balance sheet ratios Income statement and income statement/balance sheet ratios Trend analysis Common size and index analysis What does it mean? Financial statements are like a fine perfumeto be sniffed but swallowedAbraham Brilloff 1.What is financial analysis Analysis is to interpret certain information for decision purpose Financial analysis involves analyzing financial statements prepared in accordance with generally accepted accounting principles to ascertain information concerning the magnitude, timing, and riskness of future cash flows Different purpose of financial analysis The firm itself and outside providers of capitalcreditors and investorsall undertake financial analysis. The type of analysis varies according to the specific interests of the party involved Trade creditors (suppliers) are interested in the liquidity of a firm The claims of bondholders (bankers or other creditors) are more interested in the cash-flow ability of the firm to service debt over a long period of time Different purpose of financial analysis Investors in a company’s common stock are principally concerned with present and expected future earnings as well as with the stability of these earnings about a trend line Management also employ financial analysis for the purpose of internal control and to better provide what capital suppliers seek in financial condition and performance for the firm Financial statements See 129 balance sheet and income statement The probable defect of financial statements analysis: window dress (see page 135) 2.Use of financial ratios Financial ratio is an index that relates two accounting numbers and is obtained by dividing one number by the other Financial statements give the analyst a lot of accounting numbers, so why bother with a ratio? For the reason of comparison among firms 2.1Internal comparisons The analysis of financial