Overview of the Chapter

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Business Analysis and relation with Financial statement analysis Different types of business analysis Component of business analysis Basis of Business analysis Relevant analysis information beyond financial statements Several basic financial statement analysis tools Basic valuation models

MD& A Questions before investment: Future prospect? Strength and weakness Earnings potential-drivers of earnings Current financial condition-vulnerability Comparison with its competitors What is the reasonable price of stock .Introduction to Business Analysis     Business Environment and strategy analysis Review of Annual Report Management discussion and analysis.

searching for patterns in the price or volume history of stock to predict future price movement Fundamental Analysis-is the process of determining value of a company by analyzing and interpreting key factors for the economy. ability to honor obligations Equity Analysis-Identification of intrinsic value of the stock of the company Technical Analysis-charting. industry.Types of Business Analysis     Credit Analysis-is the evaluation of credit worthiness of the company i.e. and the comapny .

Users of Business Analysis         Managers Merger. acquisition and divestitures Financial Management Directors Regulators Labor Unions Customers Investors .

Components of Business Analysis      Business environment and strategy analysis-Industry analysis Accounting analysis-economic reality Financial analysis-Financial position and performance Prospective analysis Valuation .

income statement. cash flow statement. statement of shareholders equity .Basis of Analysis      Planning activities Financing activities Investing activities Operating activities Understanding components of financial statementbalance sheet.

Additional Information      Management Discussion and analysis (MD&A) Management Report Auditor Report Explanatory notes Supplemenatry Information .

Analysis Tools      Comparative financial statement analysis Common-size financial statement analysis Ratio analysis Cash flow analysis Valuation .

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