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OLEH:IFRIL RACHMAN
PRATISTA HARIYANTO
FINANCIAL STATEMENT ANALYSIS:INTRODUCTORY TECHNIQUES
CROSS-SECTIONAL TECHNIQUESA. Common-Size StatementsB. Financial Ratio Analysis
Common-Size Statements
Financial Ratio Analysis1. Cash Position
Cash +Marketable SecuritiesCurrent Liabilities
2. Liquidity Current Ratio = Current Assets
Current Liabilities3. Working Capital/Cash Flow
Working capital from operationsSales
Financial Ratio Analysis4. Capital Structure
Long-term Liabilities Shareholders’ equity
5. Debt Service Coverage Operating Income
Annual interest payments6. Profitability
Net IncomeRevenues
7. TurnoverSales
Total Assets
TIME-SERIES TECHNIQUESA. Trend StatementsB. Financial Ratio AnalysisC. Variability Measures
Trend Statements
Financial Ratio Analysis
Variability Measures
COMBINING FINANCIAL STATEMENT & NONFINANCIAL STATEMENT INFORMATIONA. Product Market InformationB. Capital Market Information
Product Market Information
Capital Market Information
CROSS-SECTIONAL ANALYSIS OF FINANCIAL STATEMENT INFORMATION
IntroductionCross-Sectional analysis is used in many
areas:1.Valuation analysis for mergers & acquisitions2.Management performance evaluation3.Prediction of financial distress4.Public policy decisions about excess profits
tax legislation
Criteria Used To Select Comparables1. Similarity on supply side2. Similarity on demand side3. Similarity in capital market attributes4. Similarity in legal ownership
Aggregation Options in Cross-Sectional Analysis1. Use a single summary measure of central
tendency2. Use both a measure of central tendency and
a measure of dispersion3. Use summary measures such as percentiles
or fractiles of the distribution of the ratios4. Use both the rank and the ratio of each firm
Data Availability Issues in Cross-Sectional AnalysisA. Nonavailability of DataB. Nonsynchronous Reporting PeriodsC. Nonuniformity in Accounting Methods
Line-Of-Business InformationA. Incentives of Firms to Disclose Line-Of-
Business DataB. Structural and Organizational Change
Implications- Acquisitions- Divestitures- Organization changes- Changes in the internal reporting system
Industry Comparisons Of Financial RatiosA. Definition of an IndustryB. Sources of Information about Firms in an
IndustryC. Evidence of Industry Differences
International Comparisons Of Financial Ratios1. Differences in the set of Accounting
Principles2. Differences in Taxation rules3. Differences in the Financing4. Differences in the Cultural
TIME-SERIES ANALYSIS OF FINANCIAL STATEMENT INFORMATION
Introduction Performance evaluation of management Examining allegations Designing a profit sharing Management decisions on alternative
accounting methods Litigation where business operations have
been disrupted
Issues in Analyzing Financial Time-Series DataA. Structural Change IssuesB. Accounting Method ChangesC. Accounting Classification IssuesD. Treatment of Extreme Observations
Time-Series Analysis Approaches1. Economic2. Visual3. Statistical
Economic Analysis Of Time-Series DataA. Causal Factor Analysis
- Mix of business decisions- Financing decisions- Operating decisions- Financial Reporting decisions
B. Seasonality- Event date induced- Weather induced- Reporting cycle induced
C. Ex Post Analysis Versus Ex Ante Analysis
Earning Management, Smoothing, and The Big BathA. Areas of Potential Management Intervention
1. Sales related2. Expense related
B. Legal and Regulatory DecisionsC. The Big Bath
THANK YOU.......
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