Financial

Analysis
What is
Process of evaluating
Financial Analysis? businesses, projects,
budgets, and other finance-
related transactions to
determine their performance
and suitability
Financial analysis If conducted internally,
financial analysis can help

cam be conducted fund managers make future

business decisions.

internally and
If conducted externally,
externally financial analysis can help
investors choose the best
possible investment
opportunities.
 Financial analysis is used to

Understanding evaluate economic trends,

set financial policy, build

Financial Analysis long-term plans for business

activity, and identify projects
or companies for investment.

examines company’s
financial statements - the
income statement, balance
sheet, and cash flow
statement.
 For example, return on assets

Understanding (ROA) is a common ratio used

to determine how efficient a

Financial Analysis company is at using its assets

and as a measure of
profitability. This ratio could
be calculated for several
companies in the same
industry and compared to
one another as part of a
larger analysis.
 There are two types of

Types of financial analysis:

fundamental analysis and

Financial Analysis technical analysis.

Fundamental Fundamental analysis uses
ratios gathered from data
within the financial

Analysis statements, such as a

company's earnings per share
(EPS), in order to determine
the business's value.

Using ratio analysis in

addition to a thorough review
of economic and financial
situations surrounding the
company, the analyst is able
to arrive at an intrinsic value
for the security.
Technical Technical analysis is a trading
discipline employed to
evaluate investments and

Analysis identify trading opportunities

by analyzing statistical trends
gathered from trading
activity, such as price
movement and volume.

Technical analysis tools are

used to scrutinize the ways
supply and demand for a
security will affect changes in
price, volume, and implied
volatility.
 Differences: Tools of the Trade
Fundamental Analysis Technical Analysis
• fundamental analysts start with a • technical analysts begin their analysis
company’s financial statements with charts
• fundamental analysts try to determine a • the investor focuses on analyzing the
company’s value by looking at financial stock chart itself for hints about where
statements the price may be headed.
 Differences: Time Horizon
Fundamental Analysis Technical Analysis
• takes a long-term approach to investing • short-term approach
 Differences: Trading vs. Investing
Fundamental Analysis Technical Analysis
• try to make long-term investments in a • often try to identify many short- to
stock’s underlying business. medium-term trades where they can flip
a stock,
Corporate Financial
Analysis
Corporate Financial Analysis
a quantitative method of evaluating a
company's financial position and the
market value of its stock.
 • Analysis of a corporation's financial
position is concerned with profitability,
liquidity, and valuation. It uses the
corporation's financial statements to
evaluate the company.
Corporate Financial • This include ratios such as net present
value (NPV) and internal rate of return
Analysis (IRR) to find projects worth executing.

• A key area of corporate financial analysis

involves extrapolating a company's past
performance, such as net earnings or
profit margin, into an estimate of the
company's future performance. This type
of historical trend analysis is beneficial to
identify seasonal trends.

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 Types of Corporate financial analysis:
Horizontal Financial Data Analysis:
entails selecting several
years of comparable
financial data to
determine a growth rate.
Profitability Analysis:
sort of income statement
analysis in which an analyst
evaluates how appealing a
company's economics are.
Vertical Financial Data Analysis:
statement is examined
independently of other
months or quarters.
Liquidity Analysis:
sort of financial research
that concentrates on a
company's balance sheet
Leverage Analysis:
total debt, may not be very illuminating
on its own, therefore comparing it to a
company's total equity may assist
provide a more complete view of the
capital structure.
Efficiency Analysis:
assess how successfully a
corporation manages and
utilizes its assets to create
revenue and cash flow.
 Horizontal Financial Data Analysis:

Pros
It helps to analyze the company’s
growth from year on year or quarter
on quarter with the increase in
operations of the company.
Cons
if the industry is downgrading despite
the company’s better performance
owing to specified factors that impact
the industry, trend analysis will indicate
the negative growth in the company.
 Horizontal Financial Data Analysis:

Pros
It helps to analyze the company’s
growth from year on year or quarter
on quarter with the increase in
operations of the company.
Cons
if the industry is downgrading despite
the company’s better performance
owing to specified factors that impact
the industry, trend analysis will indicate
the negative growth in the company.
 Vertical Financial Data Analysis:

Pros
The vertical analysis helps compare
the entities of different sizes as it
presents the financial statements
in final form.
Cons
It solely represents a single period’s
data, so it avoids comparison across
different time phases.
 Vertical Financial Data Analysis:

Pros
The vertical analysis helps compare
the entities of different sizes as it
presents the financial statements
in final form.
Cons
It solely represents a single period’s
data, so it avoids comparison across
different time phases.
Investment Financial Analysis
Investment Financial
Analysis
Investment analysis involves researching
and evaluating a security or an industry
to predict its future performance and
determine its suitability to a specific
investor.
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 Types of Investment Analysis

Top-Down Bottom-Up

starts with an analysis of the entails analyzing individual stocks for

economic, market, and industry their merits, such as their valuation,
trends before zeroing in on the management competence, pricing
investments that will benefit from power, and other unique
those trends. characteristics.
 Types of Investment Analysis

Top-Down Bottom-Up

focuses on the big picture, or how the overall

focuses on how an individual company in a sector
economy and macroeconomic factors drive
performs compared to specific companies within
the markets and, ultimately, stock prices.
the sector.
 Limitations of Financial Analysis
When companies do
financial analysis, they often
fail to consider the price
changes
Many Intangible assets are
not recorded in the
statement due to Intangible
assets not considered while
doing financial analysis.
considers the monetary based on past data in financial
aspects of companies’ statements and future results
financial statements and does can’t be like the past.
not consider the non-
monetary aspects of financial
statements.
Due to different accounting Sometimes financial analysis
policies, it is limited to a influences personal
specific period and not judgment
always comparable with
different companies’
statements
 Real-World Example of Financial Analysis
Financial Analysis of Coca Cola Company

In this research paper, we examine the financial performance from the years 2016 to
2019 of one of the biggest companies in the world which is the Coca Cola Company.
The research will look into the various ratios used in analyzing a financial situation of
business like liquidity ratios, activity ratios, debt ratios and profitability ratios and
then apply it to determine if Coca Cola Company is performing well. A data
collection method was used from Yahoo finance to better understand of the
company's financial history.

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Examples of Financial
Analysis
In the nine-month period ending Sept.
30, 2022, Amazon.com reported a net
loss of $3 billion. This was a substantial
decline from one year ago where the
company reported net income of over
$19 billion.

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 Examples of Financial
Analysis
Analysts can also use the
information above to perform
corporate financial analysis. For
example, consider Amazon's
operating profit margins below.
2022: $9,511 / $364,779 = 2.6%
2021: $21,419 / $332,410 = 6.4%
Why Is Financial Analysis Useful?

28
How Is Financial Analysis Done?
What Techniques Are Used in Conducting
Financial Analysis?

30
What Is Fundamental What Is Technical
Analysis? Analysis?

31
The Bottom Line
Financial analysis is a cornerstone of making
01 smarter, more strategic decisions based on
the underlying financial data of a company.

Whether corporate, investment, or technical

02 analysis, analysts use data to explore trends,
understand growth, seek areas of risk, and
support decision-making.

Financial analysis may include investigating

03 financial statement changes, calculating
financial ratios, or exploring operating
variances.
REPORTTER

Cyvell Mengullo Adora

MBA 2
THANK YOU!