Financial Assertion Analysis

Financial Statement Analysis

Chandra Sekhar Mishra

VGSOM, IIT Kharagpur

Format

Financial Claims and their Content

●Why Monetary Statement Research (FSA)?

●Tools for FSA

Financial Statements

Balance Sheet

Affirmation of financial situation

Statement of Assets and Liabilities

Income Statement

Statement of economic performance

Possessions: What a organization owns

Debts: What a business owes to non-owners

Equities: What a organization owes to owners

Profits and Expenditures

Cash flow Declaration

Statement cash inflows and money outflows

Operating, Investing and Loans

Balance Sheet -- Assets

Major Types of Assets

Set Assets

Assets

Current Assets

Money and money equivalents

Valuable securities

Receivables

Inventory

Financial loans and advances

Other current assets

Intangible Assets

"balance sheet" - Debts

Current Debts and Provisions

Lenders

Accounts/ Remarks payable

Accrued liabilities

Income Tax payable

Debt/ Loan

Short term and long term

Anchored and unguaranteed

Debentures and bonds

●Preference share capital

●Equity Capital

Paid-up capital

Stores and excessive

Income Affirmation

Salary

Bills

Product sales

Other salary

Operating expenditures

Financial bills

Tax dotacion

Net revenue

Appropriation of net revenue

Transfer to reserves

Distribution of revenue as dividend

Cash Flow Assertion

Income from functioning activities

Cashflow from expense activities

The money adjusted intended for depreciation, increases and/or

losses on sale of non-current assets, tax paid, and

working capital changes.

Acquisitions of non-current assets and proceeds around the

sale of noncurrent assets

Income from financing activities

Proceeds around the issue of equity/preference stocks

and loans/debentures and the payoff of

redeemable preference shares and loan/debentures

Sources of Financial Information

Gross annual Reports of Companies

●Secondary databases/ information services

●Stock exchanges

●Periodicals and Papers

●Websites

Financial Assertion Analysis (FSA)

Why FSA?

Will help evaluate earlier performance and

financial position

Helps prediction of future functionality

Helps in calculating risk, cost of capital and

capitalization price

Helps in estimating appropriate value

multiples

Monetary Performance Analysis,

contd..

Trend Analysis

A comparison of major economic figures on the

time period and observing a trend in the

same;

Comparative Statements

Comparison of financial performance between

current year and previous yr

Comparison with other companies in the

same industry/ sector

Financial Performance Analysis

Common Size Statements

A financial statement presented simply by representing every single

item as a percentage for the total quantity of which it can be

a part.

Common size balance sheet

Constructed simply by showing each item of asset like a percentage

of total resources, similarly every single item of liability and owner's collateral is demonstrated as a percentage of total liabilities and owners collateral.

Common size income assertion

In this article one can demonstrate net sales as 100% and each in the

components of expenditures and revenue as a percentage of net

sales.

Economical Ratios

Earnings

●Efficiency

●Liquidity

●Solvency

●Capital market position

Earnings Ratios

Earnings margin

Major profit to sales

Functioning profit to sales

Net profit to sales

Return on resources or revenue

Earnings ahead of interest and taxes (EBIT) to Normal Total Resources

The Ni Pont financial analysis

Mixture of profit perimeter and property efficiency (Sales to Average Total Assets)

Return about equity

●...

References: Reilly and Brown (2006), Purchase Analysis and Portfolio

Supervision, 8e, Thomson (Cengage) Learning, New

Delhi

●Bodie ainsi que al (2009), Investments, 8e, Tata McGraw Hill,

New Delhi

●Prasanna Chandra (2008), Investment Examination and

Collection Management, 3e, Tata McGraw Hill, Fresh Delhi

●Ramachandran and Kakani (2008), Economical Accounting

pertaining to Management, 2e, Tata McGraw Hill, Fresh Delhi

●Narayanaswamy (2012), Monetary Accounting: A

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