OVERVIEW FOR FINANCIAL

STATEMENT ANALYSIS
 Fundamental Analysis:
1. Economic & Business Analysis
2. Political & Legal Analysis
3. Demographic, Social & Cultural Analysis
4. Technological & Environmental Analysis
5. Financial Statement Analysis
 Technical Analysis
WIYONO PONTJOHARYO 1
 BASIC FINANCIAL
STATEMENTS
 Financial Statements:
1. Balance Sheet
2. Income Statement
3. Statement of Shareholders’ Equity
4. Statement of Cash Flows
 Notes to Financial Statements
1. Detailed information
2. Accounting policies
3. Special events with material results
WIYONO PONTJOHARYO 2
 BASIC ACCOUNTING
CONCEPTS & PRINCIPLES
 Concepts (assumptions):
1. Entity 3. Stable monetary unit
2. Going concern 4. Time period
 Principles (essential rules):
1. Matching 5. Materiality
2. Cost 6. Disclosure
3. Consistency 7. Revenue
4. Conservatism 8. Objectivity
WIYONO PONTJOHARYO 3
 FINANCIAL STATEMENT
ANALYSIS TECHNIQUES
 General Analysis:
1. Horizontal: Time Series/Trend Analysis
2. Vertical: Common Size/Cross-sectional Analysis
3. Benchmarking: Cross-company Analysis
 Specific Analysis (Ratio):
1. Liquidity 4. Leverage
2. Profitability 5. Valuation/Investors
3. Activity 6. Expense management, etc.

WIYONO PONTJOHARYO 4
SPECIFIC ANALYSIS: RATIO
 Liquidity Ratio:
1. Current Ratio 3. Cash Ratio
2. Acid Test/Quick Ratio 4. Cash Adequacy, etc.
 Profitability Ratio:
1. Return on Sales (RoS) 4. RoI (Investment)
2. Return on Assets (RoA) 5. RoE (Equity)
 Activity/Asset Management Ratio:
1. Inventory turnover 4. Days of A/R
2. Days of inventory 5. Fixed Asset Turnover
3. A/R turnover 4. Total Asset Turnover
WIYONO PONTJOHARYO 5
SPECIFIC ANALYSIS: RATIO
 Leverage/Debt Management Ratio:
1. Debt Ratio 4. Fixed Charge Coverage
2. Debt to Equity Ratio
3. Times-interest-earned Ratio
 Valuation/Investors Ratio:
1. Price/Earning Ratio 3. Market Book Value
2. Earning per Share (EPS) 4. Dividend Yield Ratio
 Expense Management Ratio:
1. Cost of Good Sold Ratio (CoGs)
2. Expense Ratio: general, admin., marketing, etc.
3. Specific Expense Ratio: R/D, telecomm., etc.
WIYONO PONTJOHARYO 6
LIMITATIONS OF FINANCIAL
ANALYSIS
 Different business complexities (cycles, seasons,
conditions, trends)
 Quality of financial results (ie: earnings, ratios etc.)
that will show the accounting policies of company
(prudent vs. liberal)
 Results are the indicators, but the real problems and
how to solve them should be found
 Off-balance sheet transactions
 Risk and uncertainties of future
 “One moment in time” story
WIYONO PONTJOHARYO 7
 CURRENT DEVELOPMENT ON
PROFESSIONAL ANALYSIS
 Traditional Analysis:
1. Financial Analysis: general (horizontal, vertical, combine
h+v) & specific (ratios)
2. Real/Physical Asset Analysis (Financial Statements-based)
 Contemporary Analysis:
1. Advanced Financial Analysis: EVA, MVA, WAI, RWA, Fin. Distress
2. Non-financial Analysis: co. reputation, brand equity, quality, CSR , etc.
3. Virtual/Non-physical Analysis (Human Capital):
 Management credibility
 Human investment
 Innovation/Intellectual Capital
 Knowledge & System Management
WIYONO PONTJOHARYO 8
 REMARKS FOR QUALITY
ANALYSIS RESULTS
 Rule of thumb in each business should be learned and
surely is very useful, but not enough for all situations
 There are so many broader, creative but relevant ratios
to be combined and applied for deeper understanding
 Not just calculating & telling the figures, but explaining
the whys & finding the meaning for implications, before
concluding the justification as ‘easy map’ (not maze) for
relevant users
 Don’t be trapped on big % and increase or decrease, but
the meaningful results as signs to be noticed by analysts
 The power of integrative analysis to find the ‘big picture’
WIYONO PONTJOHARYO 9