MFR learning outcome 4: Financial statement, analysis and interpretation

Definition of financial analysis: Financial analysis is the examination of business of a

selection of perspectives in order to fully understand the bigger financial situation and also
determine how best to strengthen the business. A financial analysis looks at many aspects of a
business from its profitability and stability to its solvency and liquidity. Included in the
financial analysis are:

Shareholders
A shareholder is defined as an individual, group, or organization that own one or more shares
within a company, it also states that there is a positive legality towards having only one
shareholder. Ratios a share holder uses are:
Profitability ratio: A profitability ratio is the instance in which you would measure
profit. Profitability ratios are a class of financial metric that are used to assess a
businesses ability to generate earnings compares to expenses and other relevant costs
during certain periods of time.
Dividend ratio: The dividend ratio provides an indication of how much money a
company is returning to shareholders, versus how much money it is keeping on hand
to reinvest in growth, pay off debt or added to cash reserves. The latter is known as
retained earnings.

Creditors
An expression used in accounting, creditor indicates to the party that has provided a
product, service or loan, and is owed money by one or more debtors. A debtor is the reverse
of a creditor it refers to the person or entity who owes money.
Once a creditor has delivered the goods/service, the payment is expected at a later date
(typically agreed upon beforehand).
To put it simply, the debtor-creditor relationship is complementary to the customer-supplier
relationship. Ratios included are: