FINANCIAL

ANALYSIS AND
REPORTING
• Financial analysis is the process of
examining a company’s performance in
the context of its industry and economic
environment in order to arrive at a
decision or recommendation.
 Overall, a central focus of financial analysis is
evaluating the company’s ability to earn a
return on its capital that is at least equal to
the cost of that capital, to profitably grow its
operations, and to generate enough cash to
meet obligations and pursue opportunities.
 Business activities are any
events that are undertaken by
a corporation for the purpose
of earning a profit.
BUSINESS
ACTIVITIES
- It encompasses all the
economic activities carried out
by a company through out the
business.
Business activities
includes:

• operating
• investing
• and financing activities
Operating activities

• relate directly to the business providing its goods to

the market, including manufacturing, distributing,
marketing, and selling; they provide most of the
company's cash flow and influence its profitability.
 Operating activities are the
primary source of earnings

• Earnings reflects the company’s sources in

buying from market ( input) and selling the
output to markets
 Investing Activities

- relate to the long-term use of cash, such as buying or

selling a property or piece of equipment, or gains and
losses from investments in financial markets and
operating subsidiaries.
• Investment in land, buildings, equipment,
legal rights (patents, copyrights), inventories,
human capital( managers and employees),
technologies and other similar assets for the
purpose of conducting the company's
business such assets are called operating
assets.
Investing excess cash in securities such as
other companies' equity stock, corpora rate
and government bonds , such assets are called
financial assets
 FINANCING
ACTIVITIES

This include sources of cash from investors or banks,

and the uses of cash paid to shareholders, such as
payment of dividends or stock repurchases, and the
repayment of loans.
FINANCIAL
STATEMENTS
• Financial Statements represent a formal record of the
financial activities of an entity.
• These are written reports that quantify the financial
strength, performance and liquidity of a company.

• Financial Statements reflect the financial effects of

business transactions and events on the entity.
 THE
ACCOUNTING
PROCESS

Accounting is the process of

identifying, measuring and
communicating economic
information about an entity to a
variety of users for decision
making purposes.
IDENTIFYING BUSINESS TRANSACTIONS

-External exchange of
something of value between
2 or more entities.
• Affect assets, liabilities and equity.
• Assets = Liabilities + Equity
• Can be reliably measured and
recorded
Accounting
information is
designed to Internal users:

meet the needs

of both internal
and external - Accounting information is
extremely valuable to an entity’s
users. owner or the management
within the organization
 External users are parties outside the entity who use
information to make decisions about the entity.

-shareholders (both current and prospective)

- investors

External users
- suppliers

-banks

- government authorities
EXTERNAL
USES OF
STATEMENT
ANAYLIS
INTERNAL
USES OF
STATEMENT
ANALYSIS
METHODS OF FINANCIAL STATEMENT ANALYSIS
HORIZONTAL
ANALYSIS
The balance sheet

• The balance sheet is a snapshot of a

company's financial position.

• The balance sheet reveals a firm's financial

resources (their assets) and obligations
(their liabilities) at a given moment in time.
Balance
Sheet
•QUIZ