FINANCIAL STATEMENT

ANALYSIS – An
Introduction
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Learning Outcomes
➢Nature and Purpose
➢Different User Groups
➢Different Methods and Tools

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What is FSA? And its Purpose?
➢Making financial information User Friendly
➢Deciphering the details as regards the revenues, costs, assets and
liabilitites
➢Understanding the financial performance as stand alone, and as a
player in the industry and sector
➢Arriving at meaningful interpretations
➢Making informed decisions

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 Financial Data used in FSA
Financial Management Proxy
Reports for Discussion and Statements
performance Analysis ➢Issued to
➢Income ➢For shareholders
Statement understanding ➢Compensation
➢Balance Sheet the past and of top
➢Statement present Interim management
Annual Report performance Audit Report ➢Disputes
showing Statements
changes in and future between
Equity outlook management,
➢Cash Flow board,
Statement shareholders

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 Analysts

Investors Suppliers

User Groups

Government
Customers
Agencies

Management
Different User Groups
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Tools and Techniques for effective
analysis of FS
Horizontal

Ratio
Tools and Trend
Techniques

Vertical

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Horizontal Analysis
COMPARATIVE STATEMENT HORIZONTAL

2017 2018 Change % Change

Particulars
(Rs) (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Equity Share Capital 10,00,000 15,00,000 5,00,000 50.00
b. Reserve and Surplus 10,00,000 10,00,000 - 0.00
Shareholders’ Fund 20,00,000 25,00,000
2. Non-Current Liabilities
a. Long-term Borrowings 2,00,000 8,00,000 6,00,000 300.00
3. Current Liabilities 3,00,000 5,00,000 2,00,000 66.67
Total 25,00,000 38,00,000
II. Assets
1. Non-Current Assets
a. Fixed Assets (Tangible) 15,00,000 25,00,000 10,00,000 66.67
b. Intangible Assets 5,00,000 5,00,000 - 0.00
20,00,000 30,00,000
2. Current Assets
a. Trade Receivables 3,50,000 6,00,000 2,50,000 71.42
b. Cash and Cash Equivalents 1,50,000 2,00,000 50,000 33.33
5,00,000 8,00,000
Total 25,00,000 38,00,000

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Trend Analysis

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Vertical Analysis - Common Size
Statement
COMMON SIZE STATEMENT - BALANCE SHEET for the period ended… VERTICAL

2017 % 2018 %
Particulars
(Rs) (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Equity Share Capital 10,00,000 40.00 15,00,000 39.47
b. Reserve and Surplus 10,00,000 40.00 10,00,000 26.32
Shareholders’ Fund 20,00,000 25,00,000
2. Non-Current Liabilities
a. Long-term Borrowings 2,00,000 8.00 8,00,000 21.05
3. Current Liabilities 3,00,000 12.00 5,00,000 13.16
Total 25,00,000 100.00 38,00,000 100.00
II. Assets
1. Non-Current Assets
a. Fixed Assets (Tangible) 15,00,000 60.00 25,00,000 65.79
b. Intangible Assets 5,00,000 20.00 5,00,000 13.16
20,00,000 30,00,000
2. Current Assets
a. Trade Receivables 3,50,000 14.00 6,00,000 15.79
b. Cash and Cash Equivalents 1,50,000 6.00 2,00,000 5.26
5,00,000 8,00,000
Total 25,00,000 100.00 38,00,000 100.00

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Ratio Analysis
➢Profitability
➢Liquidity – short term
➢Solvency – long term liquidity
➢Coverage
➢Activity
➢Leverages

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