# ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION

Size: px
Start display at page:

Download "ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION"

Transcription

1 ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION OCTOBER 2006

2 Table of Contents 1. INTRODUCTION FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) Profitability Ratios Viability and Capital Structure Ratios Liquidity Ratios Activity Ratios Investor Ratios FINANCIAL RATIOS FOR BANKS Profitability and Efficiency Ratios Productivity Ratios Balance Sheet Structure Ratios Income Structure Ratios Investor Ratios FINANCIAL RATIOS FOR INSURANCES - INSURANCE BROKERS & AGENTS Profitability Ratios Activity and Liquidity Ratios Capital Structure Ratios Investor Ratios ICAP GROUP S.A. Financial Ratios Explanation 2

3 1. INTRODUCTION Financial ratios are useful indicators to measure a company s performance and financial situation. They can be also used to analyze trends and to compare a firm s financial figures to those of competitors or those of the business sector in which it belongs to. Financial ratios can be classified according to the information they provide. ICAP has included in its products the majority of the most commonly used ratios in order to support companies directors and executives during decision-making. The present document describes the calculation of ratios applied either in companies or in sectoral business reports. ICAP GROUP S.A. Financial Ratios Explanation 3

4 2. FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) 2.1 Profitability Ratios Profitability ratios are designed to evaluate the firm's ability to generate earnings. Analysis of profit is of vital concern to stockholders since they derive revenue in the form of dividends. Profits are also important to creditors because profits are one source of funds for debt coverage. Furthermore Management uses profit as a performance measure. Return on Equity (Before Income Tax) Return on Equity (Before Interest and Income Tax) Return on Capital Employed (Before Income Tax) Return on Capital Employed (Before Interest and Income Tax) Gross Profit Margin Operating Profitability Net Profit Margin (Before Income Tax) Net Profit Margin (Before Interest and Income Tax) Net Profit Margin (before Interest, Income Tax, Depreciation and Non Operating Income) Efficiency of Financial Leverage (X) Personnel Productivity (EURO) [(Net Income for the Year Before Tax) / (Average of Owners Equity)] *100 [(Net Income for the Year Before Interest and Income Tax) / (Average of Owners Equity)] *100 [(Net Income for the Year Before Tax) / (Average of Total Owners Equity and Liabilities)] *100 [(Net Income for the Year Before Interest and Income Tax) / (Average of Total Owners Equity and Liabilities)] *100 (Total Gross Trading Results Account / Net Turnover)*100 (Operating Results Before Financial Transactions / Net Turnover) * 100 (Net Income for the Year Before Tax / Net Turnover)*100 [(Net Income for the Year Before Interest and Income Tax) / (Net Turnover)]*100 (Net Income for the Year Before Interest, Income Tax, Depreciation and Non Operating Income / Net Turnover)*100 Percentage change of Net Income for the Year Before Tax / Percentage change of Net Turnover Net Turnover / Personnel Personnel Profitability (EURO) Net Income for the Year Before Tax / Personnel ICAP GROUP S.A. Financial Ratios Explanation 4

5 2.2 Viability and Capital Structure Ratios Viability and capital structure ratios measure a company s ability to meet its obligations and how much of the company s assets are financed with debt. They reveal the equity cushion that is available to absorb any losses that may occur. Financial Leverage (: 1) (Liabilities + Transit Credit Balances + Provisions for Contingencies and Expenses) / Total Owners Equity and Liabilities Total Debt Equity Ratio (: 1) (Liabilities + Transit Credit Balances + Provisions for Contingencies and Expenses) / Owners Equity Banks Short Term Obligations to Owners Equity (Banks Short Term Obligations / Owners Equity) *100 Capital Structure (X) Return on Equity (Before Income Tax) / Return on Capital Employed (Before Income Tax) Basic Period of Viability (DAYS) Equity to Fixed Assets (X) Fixed Assets to Long Term Liabilities (X) Fixed Assets to Total Owners Equity and Liabilities Interest Coverage (Before Interest and Income Tax) (X) (Cash + Securities + Receivables) / [(Total Cost of Net Sales+ Selling Expenses) / 365] Owners Equity / Fixed Assets (Net Value) Fixed Assets (Net Value) / Long Term Liabilities [(Fixed Assets (Net Value) / (Total Owners Equity and Liabilities)] *100 Net Income for the Year Before Interest and Income Tax / Interest Charges and Related Expenses ICAP GROUP S.A. Financial Ratios Explanation 5

6 2.3 Liquidity Ratios Liquidity ratios measure the ability of a firm to meet its short-term obligations. The ability to pay short-term debt is of concern to anyone who interacts with the company. If a company cannot maintain a short-term debt-paying ability, it will not be able to maintain a long-term debt-paying ability, nor will it be able to satisfy its stockholders. The liquidity ratios look at aspects of the company's assets and their relationship to current liabilities. Current Ratio (Χ) Quick Ratio (Acid Test) (Χ Cash Ratio (Χ) (Average of: Current Assets + Transit Debit Balances) / (Average of: Short Term Liabilities + Transit Credit Balances) (Average of: Current Assets + Transit Debit Balances - Stocks) / (Average of: Short Term Liabilities + Transit Credit Balances) (Average of: Cash + Securities) / (Average of Short Term Liabilities) Working Capital (EURO) (Current Assets + Transit Debit Balances) - (Short Term Liabilities + Transit Credit Balances) Short Term Liabilities to Working Capital (Χ) Short Term Liabilities / [(Current Assets + Transit Debit Balances) (Short Term Liabilities + Transit Credit Balances)] ICAP GROUP S.A. Financial Ratios Explanation 6

7 2.4 Activity Ratios Activity ratios measure the quality of a business' receivables and how efficiently it uses and controls its assets, how effectively the firm is paying suppliers, and whether the business is overtrading or under trading on its equity (using borrowed funds). Collection Period (DAYS) Payable Period (DAYS) Inventory Turnover (DAYS) Operating Cycle (DAYS) Commercial Cycle (DAYS) Equity Turnover (Χ) Turnover of Capital Employed (Χ) Fixed Assets Turnover (Χ) [(Average of: Customers + Long Term Bills and Cheques + Doubtful Receivables) / (Net Turnover)] *365 [(Average of: Suppliers + Bills and Promissory Notes Payable + Outstanding Cheques) / (Total Cost of Net Sales)] *365 [(Average of Stocks) / (Total Cost of Net Sales)] *365 Days of Collection Period + Days of Inventory Turnover (Days of Collection Period + Days of Inventory Turnover Days of Payable Period) Net Turnover / (Average of Owners Equity) Net Turnover / (Average of Total Owners Equity and Liabilities) Net Turnover / Average of Fixed Assets (Net Value) Significance of Selling Expenses (Selling Expenses / Net Turnover) *100 ICAP GROUP S.A. Financial Ratios Explanation 7

8 2.5 Investor Ratios Investors to appraise potential investment opportunities commonly use these Ratios. Investor ratios connect the number of shares of the company and their Stock Exchange price, with the profits, the dividends and other assets. They measures the overall profit generated for each share in existence over a particular period, the proportion of earnings that are being retained by the business rather than distributed as dividends and provide a guide as to the ability of a business to maintain a dividend payment. Share Internal Value (EURO) Owners Equity / Number of Outstanding Shares Earnings per Share (EURO) Net Income for the Year Before Tax / Number of Outstanding Shares Dividend per Share (EURO) Dividend to Net Income (Before Tax) Dividend / Number of Outstanding Shares (Dividend / Net Income for the Year Before Tax) *100 ICAP GROUP S.A. Financial Ratios Explanation 8

9 3. FINANCIAL RATIOS FOR BANKS 3.1 Profitability and Efficiency Ratios Profitability and efficiency ratios are designed to evaluate the firm's ability to generate earnings. Analysis of profit is of vital concern to stockholders since they derive revenue in the form of dividends. Profits are also important to creditors because profits are one source of funds for debt coverage. Furthermore Management uses profit as a performance measure. Return on Equity (Before Income Tax) [(Net Income for the Year Before Tax) / (Average of Owners Equity)] *100 Return on Assets [(Net Income for the Year Before Tax) / (Average of Total Fixed Assets) ] *100 Return on Earning Assets [(Interest Income and Similar Income) / (Average of: Cash and Balances with the Central Bank + Treasury Bills and Other Bills + Loans and Advances to Credit Institutions + Receivables from Customers + Debts Securities Including Fixed Income Securities)] *100 Interest Expense of Interest Bearing on Owners Equity and Liabilities Return on Earning Assets Less Interest Expense of Interest Owners Equity and Liabilities (Χ) Net Return on Earning Assets Net Interest Margin Efficiency Ratio Efficiency Ratio (Except Net Profit on Financial Operations) [(Interest Expense and Similar Changes) / (Average of: Due to Credit Institutions + Liabilities to Customers + Liabilities from Credit Titles + Subordinated Debts + Debt Loan Compulsory Convertible to shares)] *100 (Return on Earning Assets Interest Expense of Interest Bearing on Owners Equity and Liabilities) [(Interest Income and Similar Income Minus Expense) / (Average of: Cash and Balances with the Central Bank + Treasury Bills and Other Bills + Loans and Advances to Credit Institutions + Receivables from Customers + Debts Securities Including Fixed Income Securities)] *100 [(Interest Income and Similar Income Minus Expense) / (Average of Total Fixed Assets)] *100 (Operating Expenses / Operating Income) *100 [(Operating Expenses) / (Operating Income Net Profit on Financial Operations)] *100 ICAP GROUP S.A. Financial Ratios Explanation 9

10 Operating Income (Except Net Interest Income) To Total Assets Operating Expenses To Assets General Administrative Expenses To Operating Expenses [Operating Income (Except Net Interest Income) / (Average of Total Assets)] *100 [Operating Expenses / (Average of Total Assets)] *100 General Administrative Expenses / Operating Income 3.2 Productivity Ratios Productivity is the quantitative relationship between what a company produces and the resources that uses. Productivity ratios show the participation of company s employees in its financial figures such as Profit or Assets etc. Personnel Productivity (EURO) Gross Margin (From Services) / Number of Personnel Personnel Profitability (EURO) Net Income for the Year Before Tax / Number of Personnel Assets to Number of Personnel (EURO) Assets / Number of Personnel Granting to Number of Personnel (EURO) Receivables from Customers (Granting) / Number of Personnel Deposits to Number of Personnel (EURO) Liabilities to Customers (Deposits) / Number of Personnel ICAP GROUP S.A. Financial Ratios Explanation 10

11 3.3 Balance Sheet Structure Ratios These ratios show the participation of company s financial figures in its balance sheet structure. Interest Earning Assets to Total Assets [(Cash and Balances with the Central Bank + Treasury Bills and Other Bills + Loans and Advances to Credit Institutions + Receivables from Customers + Debts Securities Including Fixed Income Securities) / Total Assets] *100 Granting to Total Assets [Receivables from Customers (Granting) / Total Assets] *100 Provisions for Granting to Granting Debts Securities Including Fixed Income Securities to Total Assets Interest Liabilities to Total Owners Equity and Liabilities Shareholders Equity to Total Owners Equity and Liabilities Deposits to Total Owners Equity and Liabilities [Provisions for Granting / Receivables from Customers (Granting)] *100 (Debts Securities Including Fixed Income Securities / Total Assets) *100 [(Due to Credit Institutions + Liabilities to Customers + Liabilities from Credit Titles + Subordinated Debts + Debt Loan Compulsory Convertible to shares) / Total Owners Equity and Liabilities] *100 (Shareholders Equity / Total Owners Equity and Liabilities) *100 (Liabilities to Customers (Deposits) / Total Owners Equity and Liabilities) *100 Granting to Deposits [Receivables from Customers (Granting)) / Liabilities to Customers (Deposits)] *100 Interest Expenses and Similar Charges to Other Interest Income and Similar Income 3.4 Income Structure Ratios (Interest Expenses and Similar Charges / Interest Income and Similar Income) *100 These ratios show the structure of company s profit and loss accounts. Net Interest Income to Operating Income Dividend Income to Operating Income Net Income on Financial Operations to Operating Income ) Staff Cost to Operating Income (Interest Income and Similar Income Minus Expense / Operating Income) *100 (Dividend Income / Operating Income) *100 (Net Income on Financial Operations / Operating Income) *100 Staff Cost / Operating Income ICAP GROUP S.A. Financial Ratios Explanation 11

12 3.5 Investor Ratios Investors to appraise potential investment opportunities commonly use these Ratios. Investor ratios connect the number of shares of the company and their Stock Exchange price, with the profits, the dividends and other assets. They measures the overall profit generated for each share in existence over a particular period, the proportion of earnings that are being retained by the business rather than distributed as dividends and provide a guide as to the ability of a business to maintain a dividend payment. Share Internal Value (EURO) Owners Equity / Number of Outstanding Shares Earnings per Share (EURO) Net Income for the Year Before Tax / Number of Outstanding Shares Dividend per Share (EURO) Dividend / Number of Outstanding Shares Dividend to Net Income (Before Tax) Dividend / Net Income (Before Tax) *100 Net Income (After Tax) to Dividend (x) Net Income (After Tax) / Dividend ICAP GROUP S.A. Financial Ratios Explanation 12

13 4. FINANCIAL RATIOS FOR INSURANCES - INSURANCE BROKERS & AGENTS 4.1 Profitability Ratios Profitability ratios are designed to evaluate the firm's ability to generate earnings. Analysis of profit is of vital concern to stockholders since they derive revenue in the form of dividends. Profits are also important to creditors because profits are one source of funds for debt coverage. Furthermore Management uses profit as a performance measure. Return on Equity (Before Income Tax) Return on Capital Employed (Before Income Tax) Return on Capital Employed (Before Interest and Income Tax) [(Net Income for the Year Before Tax) / (Average of Owners Equity)] *100 [(Net Income for the Year Before Tax) / (Average of Total Owners Equity and Liabilities)] *100 [(Net Income for the Year Before Interest and Income Tax) / (Average of Total Owners Equity and Liabilities)] *100 Gross Profit Margin [(Total Gross Trading Results Account / Net Turnover)]*100 Operating Profitability Net Profit Margin (Before Income Tax) Personnel Productivity (EURO) [(Operating Results Before Financial Transactions / Net Turnover)] * 100 (Net Income for the Year Before Tax / Net Turnover)*100 Grand Total Income / Number of Personnel ICAP GROUP S.A. Financial Ratios Explanation 13

14 4.2 Activity and Liquidity Ratios Activity ratios measure the quality of a business' receivables and how efficiently it uses and controls its assets, how effectively the firm is paying suppliers, and whether the business is overtrading or under trading on its equity (using borrowed funds). Liquidity ratios measure the ability of a firm to meet its short-term obligations. The ability to pay short-term debt is of concern to anyone who interacts with the company. If a company cannot maintain a short-term debt-paying ability, it will not be able to maintain a long-term debt-paying ability, nor will it be able to satisfy its stockholders. The liquidity ratios look at aspects of the company's assets and their relationship to current liabilities. Collection Period (DAYS) Equity Turnover (Χ) Turnover of Capital Employed (Χ) Current Ratio (Χ) [(Average of Receivables) / Grand Total Income] *365 Grand Total Income / (Average of Equity Capital) Grand Total Income / Average of Total Owners Equity and Liabilities) (Average of: Current Assets + Transit Debit Balances) / (Average of : Short Term Liabilities + Transit Credit Balances) 4.3 Capital Structure Ratios Capital structure ratios measure a company s ability to meet its obligations and how much of the company s assets are financed with debt. They reveal the equity cushion that is available to absorb any losses that may occur. Total Debt Equity Ratio (: 1) Insurance Provisions to Total Owners Equity and Liabilities Shareholders Equity to Total Owners Equity and Liabilities Intangible Assets Ratio Interest Coverage (Before Interest and Income Tax) (X) Total Liabilities + Total Insurance (Technical) Provisions / Equity Capital (Insurance Provisions / Total Owners Equity and Liabilities) *100 (Equity Capital Total Owners Equity and Liabilities) *100 (Establishment Costs and Intangibles (Net Value) / Total Fixed Assets) *100 (Net Income for the Year Before Interest and Income Tax / Interest Charges and Related Expenses ICAP GROUP S.A. Financial Ratios Explanation 14

15 4.4 Investor Ratios Investors to appraise potential investment opportunities commonly use these Ratios. Investor ratios connect the number of shares of the company and their Stock Exchange price, with the profits, the dividends and other assets. They measures the overall profit generated for each share in existence over a particular period, the proportion of earnings that are being retained by the business rather than distributed as dividends and provide a guide as to the ability of a business to maintain a dividend payment. Share Internal Value (EURO) Owners Equity / Number of Outstanding Shares Earnings per Share (EURO) Net Income for the Year Before Tax / Number of Outstanding Shares Dividend per Share (EURO) Dividend / Number of Outstanding Shares Dividend to Net Income (Before Tax) Dividend / Net Income (Before Tax) *100 Net Income (After Tax) to Dividend (x) Net Income (After Tax) / Dividend ICAP GROUP S.A. Financial Ratios Explanation 15

### Ratio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability

A) Liquidity Ratio : - Ratio Analysis 1) Current ratio = Current asset Current Liability 2) Quick ratio or Acid Test ratio = Quick Asset Quick liability Quick Asset = Current Asset Stock Quick Liability

### FINANCIAL ACCOUNTING TOPIC: FINANCIAL ANALYSIS

SYLLABUS Compulsory part Basic ratio analysis 1. State the general functions of accounting ratios. 2. Calculate and interpret the following ratios: a. working capital/current ratio, quick/liquid/acid test

### Financial Statements and Ratios: Notes

Financial Statements and Ratios: Notes 1. Uses of the income statement for evaluation Investors use the income statement to help judge their return on investment and creditors (lenders) use it to help

### Financial Ratios and Quality Indicators

Financial Ratios and Quality Indicators From U.S. Small Business Administration Online Women's Business Center If you monitor the ratios on a regular basis you'll gain insight into how effectively you

### Return on Equity has three ratio components. The three ratios that make up Return on Equity are:

Evaluating Financial Performance Chapter 1 Return on Equity Why Use Ratios? It has been said that you must measure what you expect to manage and accomplish. Without measurement, you have no reference to

### Income Measurement and Profitability Analysis

PROFITABILITY ANALYSIS The following financial statements for Spencer Company will be used to demonstrate the calculation of the various ratios in profitability analysis. Spencer Company Comparative Balance

### Interpretation of Financial Statements

Interpretation of Financial Statements Author Noel O Brien, Formation 2 Accounting Framework Examiner. An important component of most introductory financial accounting programmes is the analysis and interpretation

### Current Assets. Current Liabilities. Quick Assets or Liquid Assets. Current Liabilities. 1. Liquidity Ratios 1 Current Ratio Formula.

1. Liquidity Ratios 1 Current Ratio Current Assets Current Liabilities This ratio shows short-term financial soundness of the business. Higher ratio means better capacity to meet its current obligation.

### 9901_1. A. 74.19 days B. 151.21 days C. 138.46 days D. 121.07 days E. 84.76 days

1. A stakeholder is: 9901_1 Student: A. a creditor to whom a firm currently owes money. B. any person who has voting rights based on stock ownership of a corporation. C. any person or entity other than

### Ratio Analysis CBDC, NB. Presented by ACSBE. February, 2008. Copyright 2007 ACSBE. All Rights Reserved.

Ratio Analysis CBDC, NB February, 2008 Presented by ACSBE Financial Analysis What is Financial Analysis? What Can Financial Ratios Tell? 7 Categories of Financial Ratios Significance of Using Ratios Industry

### Total shares at the end of ten years is 100*(1+5%) 10 =162.9.

FCS5510 Sample Homework Problems Unit04 CHAPTER 8 STOCK PROBLEMS 1. An investor buys 100 shares if a \$40 stock that pays a annual cash dividend of \$2 a share (a 5% dividend yield) and signs up for the

### Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased.

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Receivable are the total amounts customers owe your business for goods or services sold

### Consolidated Interim Earnings Report

Consolidated Interim Earnings Report For the Six Months Ended 30th September, 2003 23th Octorber, 2003 Hitachi Capital Corporation These financial statements were prepared for the interim earnings release

### E2-2: Identifying Financing, Investing and Operating Transactions?

E2-2: Identifying Financing, Investing and Operating Transactions? Listed below are eight transactions. In each case, identify whether the transaction is an example of financing, investing or operating

### Course 1: Evaluating Financial Performance

Excellence in Financial Management Course 1: Evaluating Financial Performance Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a basic understanding of how to use ratio analysis for evaluating

### For our curriculum in Grade 12 we are going to use ratios to analyse the information available in the Income statement and the Balance sheet.

SUBJECT: ACCOUNTING GRADE 12 CHAPTER: COMPANIES LESSON: ANALYSIS AND INTERPRETATION-RATIOS LESSON OVERVIEW (KNOWLEDGE AREAS) LESSON 1. Introduction 2. Analysing of financial statements and its purpose

### TYPES OF FINANCIAL RATIOS

TYPES OF FINANCIAL RATIOS In the previous articles we discussed how to invest in the stock market and unit trusts. When investing in the stock market an investor should have a clear understanding about

### How To Calculate Financial Leverage Ratio

What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? HOCK international - 2004 1 HOCK international - 2004 2 How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? HOCK

### Financial Formulas. 5/2000 Chapter 3 Financial Formulas i

Financial Formulas 3 Financial Formulas i In this chapter 1 Formulas Used in Financial Calculations 1 Statements of Changes in Financial Position (Total \$) 1 Cash Flow (\$ millions) 1 Statements of Changes

### Ratios from the Statement of Financial Position

For The Year Ended 31 March 2007 Ratios from the Statement of Financial Position Profitability Ratios Return on Sales Ratio (%) This is the difference between what a business takes in and what it spends

### EMERSON AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) TABLE 1 Quarter Ended March 31, Percent Change Net Sales \$ 5,854 \$ 5,919 1% Costs and expenses: Cost of sales 3,548 3,583

### Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

Financial Ratios Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios

### Financial Statements Tutorial

Financial Statement Review: Financial Statements Tutorial There are four major financial statements used to communicate information to external users (creditors, investors, suppliers, etc.) - 1. Balance

### Is Apple overvalued? An Introduction to Financial Analysis

Is overvalued? An Introduction to Financial Analysis The fact that the stock price almost doubled during the last year, was evidence enough for many people to say that investors had gone crazy. Other people

### Understanding A Firm s Financial Statements

CHAPTER OUTLINE Spotlight: J&S Construction Company (http://www.jsconstruction.com) 1 The Lemonade Kids Financial statement (accounting statements) reports of a firm s financial performance and resources,

### performance of a company?

How to deal with questions on assessing the performance of a company? (Relevant to ATE Paper 7 Advanced Accounting) Dr. M H Ho This article provides guidance for candidates in dealing with examination

### Chapter 002 Financial Statements, Taxes and Cash Flow

Multiple Choice Questions 1. The financial statement summarizing the value of a firm's equity on a particular date is the: a. income statement. B. balance sheet. c. statement of cash flows. d. cash flow

### STATEMENT OF CASH FLOWS AND WORKING CAPITAL ANALYSIS

C H A P T E R 1 0 STATEMENT OF CASH FLOWS AND WORKING CAPITAL ANALYSIS I N T R O D U C T I O N Historically, profit-oriented businesses have used the accrual basis of accounting in which the income statement,

### Chapter 17: Financial Statement Analysis

FIN 301 Class Notes Chapter 17: Financial Statement Analysis INTRODUCTION Financial ratio: is a relationship between different accounting items that tells something about the firm s activities. Purpose

### Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information.

0 Learning Objectives: 14.1 Describe the important of accounting and financial information. 14.2 Differentiate between managerial and financial accounting. 14.3 Identify the six steps of the accounting

### Consolidated balance sheet

Consolidated balance sheet Non current assets 31/12/2009 31/12/2008 (*) 01/01/2008 (*) Property, plant and equipment 1,352 1,350 1,144 Investment property 7 11 11 Fixed assets held under concessions 13,089

### 9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no

### TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations:

TRANSACTIONS ANALYSIS EXAMPLE Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: 1. Billings to clients for services provided: \$350,000

### CASH FLOW STATEMENT (AND FINANCIAL STATEMENT)

CASH FLOW STATEMENT (AND FINANCIAL STATEMENT) - At the most fundamental level, firms do two different things: (i) They generate cash (ii) They spend it. Cash is generated by selling a product, an asset

### ACC 255 FINAL EXAM REVIEW PACKET (NEW MATERIAL)

Page 1 ACC 255 FINAL EXAM REVIEW PACKET (NEW MATERIAL) Complete these sample exam problems/objective questions and check your answers with the solutions at the end of the review file and identify where

### Discussion Board Articles Ratio Analysis

Excellence in Financial Management Discussion Board Articles Ratio Analysis Written by: Matt H. Evans, CPA, CMA, CFM All articles can be viewed on the internet at www.exinfm.com/board Ratio Analysis Cash

### Using Accounts to Interpret Performance

Using s to Interpret Performance ing information is used by stakeholders to judge the performance and efficiency of a business Different stakeholders will look for different things: STAKEHOLDER Shareholders

### Analyzing the Statement of Cash Flows

Analyzing the Statement of Cash Flows Operating Activities NACM Upstate New York Credit Conference 2015 By Ron Sereika, CCE,CEW NACM 1 Objectives of this Educational Session u Show how the statement of

### GBA 521 Midterm Review Dr. Markelevich

GBA 521 Midterm Review Dr. Markelevich Multiple Choice (3 points for each question) Identify the letter of the choice that best completes the statement or answers the question. Wynn Corp. Wynn Corp. reported

### PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8)

COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) Page 137 NAME ANSWER KEY PROFESSOR S NAME SECTION SCORE ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) INSTRUCTIONS: COMPLETE ALL

### Financial Ratio Analysis A GUIDE TO USEFUL RATIOS FOR UNDERSTANDING YOUR SOCIAL ENTERPRISE S FINANCIAL PERFORMANCE

Financial Ratio Analysis A GUIDE TO USEFUL RATIOS FOR UNDERSTANDING YOUR SOCIAL ENTERPRISE S FINANCIAL PERFORMANCE December 2013 Acknowledgments This guide and supporting tools were developed by Julie

### Consolidated Balance Sheets

Consolidated Balance Sheets March 31 2015 2014 2015 Assets: Current assets Cash and cash equivalents 726,888 604,571 \$ 6,057,400 Marketable securities 19,033 16,635 158,608 Notes and accounts receivable:

### Liquidity analysis: Length of cash cycle

2. Liquidity analysis: Length of cash cycle Operating cycle of a merchandising firm: number of days it takes to sell inventory + number of days until the resulting receivables are converted to cash Acquisition

### Appendix. Selected Financial Ratios Useful in Analytical Procedures

Selected Financial Ratios Useful in Analytical Procedures < Appendix D A number of financial ratios are used by auditors as analytical procedures. These ratios are broken down into four categories: short-term

### Brief Report on Closing of Accounts (connection) for the Term Ended March 31, 2007

MARUHAN Co., Ltd. Brief Report on Closing of (connection) for the Term Ended March 31, 2007 (Amounts less than 1 million yen omitted) 1.Business Results for the term ended on March, 2007 (From April 1,

### BACKGROUND KNOWLEDGE for Teachers and Students

Pathway: Business, Marketing, and Computer Education Lesson: BMM C6 4: Financial Statements and Reports Common Core State Standards for Mathematics: N.Q.2 Domain: Quantities Cluster: Reason quantitatively

### 3,000 3,000 2,910 2,910 3,000 3,000 2,940 2,940

1. David Company uses the gross method to record its credit purchases, and it uses the periodic inventory system. On July 21, 20D, the company purchased goods that had an invoice price of \$ with terms

### E5-4 Assessing receivable and inventory turnover (AICPA adapted)

E5-4 Assessing receivable and inventory turnover (AICPA adapted) Accounts receivable turnover Net credit sales = Average trade receivables = \$2,500,000 \$462,500 = 5.41 times where average trade receivables

### COMPANIES INTERPRETATION OF FINANCIAL STATEMENTS 13 MARCH 2014

COMPANIES INTERPRETATION OF FINANCIAL STATEMENTS 13 MARCH 2014 In this lesson we: Introduction Lesson Description Look at analysing financial statements and its purpose Consider users of financial statements

### ILLUSTRATION 5-1 BALANCE SHEET CLASSIFICATIONS

ILLUSTRATION 5-1 BALANCE SHEET CLASSIFICATIONS MAJOR BALANCE SHEET CLASSIFICATIONS ASSETS = LIABILITIES + OWNERS' EQUITY Current Assets Long-Term Investments Current Liabilities Long-Term Debt Capital

### Finance and Accounting For Non-Financial Managers

Finance and Accounting For Non-Financial Managers Accounting/Finance Recording, classifying, and summarizing financial transactions in terms of dollars and their interpretation 1 Key Accounting Terms Accounting

### Credit Analysis 10-1

Credit Analysis 10-1 10-2 Liquidity and Working Capital Basics Liquidity - Ability to convert assets into cash or to obtain cash to meet short-term obligations. Short-term - Conventionally viewed as a

### FINANCIAL MANAGEMENT

100 Arbor Drive, Suite 108 Christiansburg, VA 24073 Voice: 540-381-9333 FAX: 540-381-8319 www.becpas.com Providing Professional Business Advisory & Consulting Services Douglas L. Johnston, II djohnston@becpas.com

### Computing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio =

1 Computing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio = Cash / CL 98 / 540 =.18 times 2 Computing Leverage

### Consolidated and Non-Consolidated Financial Statements

May 13, 2016 Consolidated and Non-Consolidated Financial Statements (For the Period from April 1, 2015 to March 31, 2016) 1. Summary of Operating Results (Consolidated) (April 1,

### * * * Chapter 15 Accounting & Financial Statements. Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

Chapter 15 Accounting & Financial Statements Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall Bookkeeping vs. Accounting Bookkeeping Accounting The recording of business transactions.

### Financial Statements

Financial Statements The financial information forms the basis of financial planning, analysis & decision making for an organization or an individual. Financial information is needed to predict, compare

### GVEP Workshop Finance 101

GVEP Workshop Finance 101 Nairobi, January 2013 Agenda Introducing business finance Understanding financial statements Understanding cash flow LUNCH Reading and interpreting financial statements Evaluating

### Contribution 787 1,368 1,813 983. Taxable cash flow 682 1,253 1,688 858 Tax liabilities (205) (376) (506) (257)

Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2012 Answers 1 (a) Calculation of net present value (NPV) As nominal after-tax cash flows are to be discounted, the nominal

### Preparing Financial Statements

Preparing Financial Statements Understanding financial statements is essential to the success of a small business. They can be used as a roadmap to steer you in the right direction and help you avoid costly

### Issuance of Common Stock example

Issuance of Common Stock example Let's assume that a company wants to raise \$10,000 through the issuance of common stock. At the time the stock is sold the market price is \$50 per share. the company will,

### Atthapol Charoenkietkrai ACG2021 Section 2

Atthapol Charoenkietkrai ACG2021 Section 2 Amazon has been in a good position for the last few years and still on a rise. The assets have increased, and the debt has decreased. The company has exponentially

### International Financial Accounting (IFA)

International Financial Accounting (IFA) Preparation and presentation of Financial Statements DEPARTMENT OF BUSINESS AND LAW ROBERTO DI PIETRA SIENA, NOVEMBER 4, 2013 1 INTERNATIONAL FINANCIAL ACCOUNTING

### Financial ratio analysis

Financial ratio analysis A reading prepared by Pamela Peterson Drake O U T L I N E 1. Introduction 2. Liquidity ratios 3. Profitability ratios and activity ratios 4. Financial leverage ratios 5. Shareholder

### Chapter. How Well Am I Doing? Financial Statement Analysis

Chapter 17 How Well Am I Doing? Financial Statement Analysis 17-2 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain the need for and limitations of financial statement

### RAPID REVIEW Chapter Content

RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

### Chapter 1. Introduction to Accounting and Business

1 Chapter 1 Introduction to Accounting and Business Learning Objective 1 Describe the nature of a business, the role of accounting, and ethics in business. Nature of Business and Accounting A business

### Nomura Securities Co., Ltd. Non-consolidated Balance Sheets

ASSETS Non-consolidated Balance Sheets Nomura Securities Co., Ltd. (Millions of yen) March 31, 2014 March 31, 2015 Increase/(Decrease) Current Assets 12,488,887 13,949,399 1,460,512 Cash and time deposits

### ACCOUNTING FOR NON-ACCOUNTANTS

Deutsch and Chikarovski's ACCOUNTING FOR NON-ACCOUNTANTS A Question and Answer Handbook Robert Deutsch and Kris Chikarovski THE FEDERATION PRESS 2012 Preface - x Who is this book for? x What is in this

### Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements

Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements In the United States, businesses generally present financial information in the form of financial statements

### Creating a Successful Financial Plan

Creating a Successful Financial Plan Basic Financial Reports Balance Sheet - Estimates the firm s worth on a given date; built on the accounting equation: Assets = Liabilities + Owner s Equity Income Statement

### Director s Guide to Credit

Federal Reserve Bank of Atlanta Director s Guide to Credit This guide was created by the Supervision and Regulation Division of the Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta,

### Financial Forecasting (Pro Forma Financial Statements)

Financial Modeling Templates Financial Forecasting (Pro Forma Financial Statements) http://spreadsheetml.com/finance/financialplanningforecasting_proformafinancialstatements.shtml Copyright (c) 2009, ConnectCode

### Preparing a Successful Financial Plan

Topic 9 Preparing a Successful Financial Plan LEARNING OUTCOMES By the end of this topic, you should be able to: 1. Describe the overview of accounting methods; 2. Prepare the three major financial statements

### Chapter 9 Solutions to Problems

Chapter 9 Solutions to Problems 1. a. Cash and cash equivalents are cash in hand and in banks, plus money market securities with maturities of 90 days or less. Accounts receivable are claims on customers

### Often stock is split to lower the price per share so it is more accessible to investors. The stock split is not taxable.

Reading: Chapter 8 Chapter 8. Stock: Introduction 1. Rights of stockholders 2. Cash dividends 3. Stock dividends 4. The stock split 5. Stock repurchases and liquidations 6. Preferred stock 7. Analysis

### Working Capital Concept & Animation

Working Capital Concept & Animation Meaning A measure of both a company's efficiency and its short-term financial health. The working capital is calculated as: Working Capital = Current Assets Current

### Accounting Self Study Guide for Staff of Micro Finance Institutions

Accounting Self Study Guide for Staff of Micro Finance Institutions LESSON 2 The Balance Sheet OBJECTIVES The purpose of this lesson is to introduce the Balance Sheet and explain its components: Assets,

### Financial Terms & Calculations

Financial Terms & Calculations So much about business and its management requires knowledge and information as to financial measurements. Unfortunately these key terms and ratios are often misunderstood

### CH 23 STATEMENT OF CASH FLOWS SELF-STUDY QUESTIONS

C H 2 3, P a g e 1 CH 23 STATEMENT OF CASH FLOWS SELF-STUDY QUESTIONS (note from Dr. N: I have deleted questions for you to omit, but did not renumber the remaining questions) 1. The primary purpose of

### The Basics of Accounting ACCT 201

The Basics of Accounting ACCT 201 Content Accounting definition Accounting equation Accounting elements Asset, Liabilities, & Equity Transactions Accounts Receivable vs Accounts Payable Retained Earnings

### Financial Statement Ratio Analysis

Management Accounting 319 Financial Statement Ratio Analysis Financial statements as prepared by the accountant are documents containing much valuable information. Some of the information requires little

### 14. Calculating Total Cash Flows.

14. Calculating Total Cash Flows. Greene Co. shows the following information on its 2008 income statement: Sales = \$138,000 Costs = \$71,500 Other expenses = \$4,100 Depreciation expense = \$10,100 Interest

### Name of the holder of a capital markets services licence: Statement of assets and liabilities as at: (dd/mm/yy)

SECURITIES AND FUTURES ACT (CHAPTER 289) SECURITIES AND FUTURES (FINANCIAL AND MARGIN REQUIREMENTS FOR HOLDERS OF CAPITAL MARKETS SERVICES LICENCES) REGULATIONS (Rg 13) REGULATION 27(1)(a), (3)(a), AND

### 1. Operating, Investment and Financial Cash Flows

1. Operating, Investment and Financial Cash Flows Solutions Problem 1 During 2005, Myears Oil Co. had gross sales of \$1 000,000, cost of goods sold of \$400,000, and general and selling expenses of \$300,000.

### Please NOTE This example report is for a manufacturing company; however, we can address a similar report for any industry sector.

Please NOTE This example report is for a manufacturing company; however, we can address a similar report for any industry sector. Performance Review For the period ended 12/31/2013 Provided By Holbrook

### Statement of Cash Flows

THE CONTENT AND VALUE OF THE STATEMENT OF CASH FLOWS The cash flow statement reconciles beginning and ending cash by presenting the cash receipts and cash disbursements of an enterprise for an accounting

### NWC = current assets - current liabilities = 2,100

Questions and Problems Chapters 2,3 pp45-47 1. Building a balance sheet. Penguin Pucks, Inc., has current assets of \$3,000, net fixed assets \$6,000, current liabilities of \$900, and long-term debt of \$5,000.

### Financial analysis. Liquidity analysis Liquidity ratios are designed to measure a company's ability to cover its short term obligations.

Financial analysis Financial analysis is a service that allows evaluating company's liquidity, activity, capital structure and profitability indicators on the basis of information in the annual reports

### National Black Law Journal UCLA

National Black Law Journal UCLA Peer Reviewed Title: An Introduction to Financial Statements for the Practicing Lawyer Journal Issue: National Black Law Journal, 4(1) Author: Edmonds, Thom Publication

### CHAPTER 11 ANALYZING FINANCIAL STATEMENTS: A MANAGERIAL PERSPECTIVE

CHAPTER 11 ANALYZING FINANCIAL STATEMENTS: A MANAGERIAL PERSPECTIVE Bill Reston is the chief operating officer of Valley Home Loans, a residential mortgage lender located in Philadelphia, Pennsylvania.

### 6. Financial Planning. Break-even. Operating and Financial Leverage.

6. Financial Planning. Break-even. Operating and Financial Leverage. Financial planning primarily involves anticipating the impact of operating, investment and financial decisions on the firm s future

### FUNDAMENTALS OF HEALTHCARE FINANCE. Online Appendix B Financial Analysis Ratios

3/27/09 FUNDAMENTALS OF HEALTHCARE FINANCE Online Appendix B Financial Analysis Ratios Introduction In Chapter 13 of Fundamentals of Healthcare Finance, we indicated that financial ratio analysis is a

### Business Valuation of Sample Industries, Inc. As of June 30, 2008

Business Valuation of Sample Industries, Inc. As of June 30, 2008 Prepared for: Timothy Jones, CEO ABC Actuarial, Inc. Prepared by: John Smith, CPA ACME Valuation Services, LLP 500 North Michigan Ave.

### SESSION 07 INTERPRETATION OF FINANCIAL STATEMENTS PART 1. GDM Managing Finance

SESSION 07 INTERPRETATION OF FINANCIAL STATEMENTS PART 1 GDM Managing Finance Accounting Management Accounting Financial Accounting Session 07 Synopsis 1. Objective of accounting 2. Users of accounting

### Consolidated Financial Review for the First Quarter Ended June 30, 2004

Consolidated Financial Review for the First Quarter Ended August 9, 2004 Company Name: Head Office: Tokyo, Japan URL: Stock exchange listing: Tokyo Stock Exchange 1ST Section Code number: 6481 Representative:

### Trade Date The date of the previous trading day. Recent Price is the closing price taken from this day.

Definition of Terms Price & Volume Share Related Institutional Holding Ratios Definitions for items in the Price & Volume section Recent Price The closing price on the previous trading day. Trade Date