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financial analysis

financial analysis

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Published by pearlcrystalraj

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Published by: pearlcrystalraj on Nov 28, 2011
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01/13/2014

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INTRODUCTION TO FINANCE
Due to ongoing advancements in technology, new legislation, and other innovation, the field of finance is rapidly changing. Introduction tofinance develops the three components of finance in an interactiveframework that is consistent with the responsibilities of all- financial professionals, managers, intermediaries, and investors in today'seconomy. In the last decade, the academic study of finance hasexperienced an infusion of new concept and quantitative methodologiesthat pace it among the most sophisticated and growing areas of businessand economics. New developments in the traditional areas of finance theory of rationalinvestor portfolio choice, interpretation and determination of security prices, efficient corporate decision making has been approached from the perspective of a single integrating paradigm derived from economictheory.In our present day economy finance is defined as provision of money at atime when it is required. Every enterprise whether it is big, medium or small needs finance to carry out its operation and to achieve its target.Infact, finance is so indispensable today that it is rightly said to belifeblood of enterprise without adequate finance no enterprise can possibly accomplish it objectives.The importance of corporation finance has arisen because of the fact that present day business activities are predominantly on a company or corporate form of organization. The advent of corporate enterprises hasresulted into:
the increase in size and influence of the business enterprise
wide distribution of corporate ownership
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separation of ownership and managementThese factors have increased the importance of finance.
BUSINESS FINANCE
Business finance is the activity, which is concerned with the acquisitionand conservation of capital funds in meeting the financial requirementsand overall objectives of the firm. Business finance deals primarily withraising, administering and disbursing funds by private own businessunits operating in non- financial fields of industry. To sum up in simplewords we can say that financial management as practiced by businessfirms can be called corporation finance or business finance.
AIMS OF FINANCE:
Acquiring sufficient fundsProper utilization of fundsIncreasing profitability Maximizing firms valueEstimating financial requirementsDeciding capital structureSelecting a source of financeSelecting a pattern of investmentProper cash managementImplementing financial controlProper use of surplus
FINANCIAL STATEMENTS
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Financial statements (or financial reports) are formal records of a business' financial activities. It is a collection of data organized accordingto logical and consistent accounting procedures. These statements providean overview of a business' profitability and financial condition in bothshort and long term.A sound understanding of financial statements helps you:Identify unfavorable trends and tendencies in your business's operations(for example, the unhealthy buildup of inventory or accounts receivable) before the situation becomes critical.Monitor your cash flow requirements on a timely basis, and identifyfinancing needs early.Monitor important indicators of financial health (for example, liquidityratios, efficiency ratios, profitability ratios, and solvency ratios).Monitor periodic increases and decreases in wealth (specifically, owners'or stockholder’s equity).Monitor your performance against your financial plan, if you havedeveloped one.
DEFINITION:
According to John N. Myer “the financial statements provide a summaryof the accounts of a business enterprise, the balance sheet reflecting theassets and liabilities and the income statement showing the results of operations during a certain period”
OBJECTIVES OF FINANCIAL STATEMENTS:
The primary objective of financial statements is to assist in decisionmaking. The Accounting Principles Board of America (APB) states thefollowing other objectives:
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