Skip to main content

MBA NOTES:USER OF FINANCIAL STATEMENTS

USER OF FINANCIAL STATEMENTS

Analysis of financial statements is linked with the objective and interest of the individual agency involved. some of the agencies interested include management, investors, creditors, bankers, workers, government and public at large.

MANAGEMENT

Management is interested in the financial performance and financial condition of the enterprise. it would like to know about its viability as an on going concern, management of cash, debtors, inventory and fixed asset and adequacy of capital structure. Management would also be interested in the overall financial position and profitability of the enterprise as a whole and its various departments and divisions.

INVESTORS

An investor is interested in the profitability and safety of his investment and would like to know whether the business is profitable, has growth potential and is progressing on sound lines. The present investors want to decide whether they should hold the securities of the company or sell them. potential investors, on the other hand, want to know whether they should invest in the shares of the company or not. investors (Shareholders or owners) and potential investors, thus, make use of the financial statements to judge the present and future earning capacity of the business, to judge the operational efficiency of the business and to know the safety of investment and growth prospects.

BANKERS AND LENDERS

Bankers and lenders are interested in serving of their loans by the enterprise, i.e. regular payment of interest and repayment of principal amount on schedule dates. They also like to know the safety of their investment and reliability of returns.

SUPPLIERS / CREDITORS

Creditors dealing with the enterprise are interested in receiving their payments as and when fall due and would like to know its ability to honor its  short-term commitments.

EMPLOYEES

Employees interested in better emoluments, bonus and continuance of the business, would like to know its financial performance and profitability.

GOVERNMENT

Government and regulatory authorities would like to ensure that the financial statements prepared areas per the specified laws and rules and are to safe guard the interest of various concerned agencies. e.g.: Taxation authorities would be interested in ensuring proper assessment of tax liability of the enterprise as per the laws.

STOCK EXCHANGE

Stock exchange uses the financial statements to analyse and thereafter, inform its members about the performance, financial health  etc, of the company, to see whether financial statements prepared are in conformity with the specified laws and rules and to see whether they safeguard the interest of various concerned agencies.
Other regulatory authorities  (such as, company law board, SEBI, stock exchanges, tax authorities etc) would like that the financial statements prepared are in conformity with the specified laws and rules and are to safeguard the interest of various concerned agencies, For example, taxation authorities would be interested in ensuring proper assessment of tax liability of the enterprise as per the laws in force from time to time.

CUSTOMER

Customer are interested to ascertain continuance of an enterprise. for example, an enterprise may be supplier of a particular type of consumer goods and in case it appears that the enterprise may not continue for a long time, the customer has to find an alternate source.

PUBLIC

Enterprises affect members of the public in a variety of ways. for example, enterprises may make a substantial contribution to the local economy in many ways including the number of people, they employ and their patronage of local suppliers, Financial statements may assist the public by providing information about trends and recent developments in the prosperity of the enterprise and the range of its activities.
Different agencies thus look at the enterprise from their respective viewpoint and are interested in knowing about its profitability and financial condition. In short a detailed cause and effect study of profitability and financial condition is the over all objective of financial statement analysis.


SYNOPSIS OF FINANCIAL ANALYSIS
FINANCIAL STATEMENTS / FINANCIAL REPORTS
USERS OF FINANCIAL STATEMENTS
TYPES OF FINANCIAL ANALYSIS
TOOLS OF FINANCIAL ANALYSIS (METHODS)
RATIO ANALYSIS
CLASSIFICATION OF RATIOS
LIQUIDITY RATIOS
PROFITABILITY RATIOS
LEVERAGE RATIO
EFFICIENCY RATIO



MBA NOTES
MBA
Labels:

Comments

Post a Comment

Popular posts from this blog

CAPM MODEL (CAPITAL ASSET PRICING MODEL)

According to this model company have to face two main types of risk. Risk= Systematic + un-systematic Systematic Risk: The risk face by the company due to its external environment is called systematic risk. This risk cannot be controled by the company. Example: Pocitical instability, war in the country, energy crises in the country etc. Un-Systematics Risk: The risk face by the company due to its internal environment is called un-systematic risk.This risk can be conroled by the company. Example: shortage of employees, Clash between the management etc. CAP MODEL: A model which shows the relationship between the systematic return and not shows un-systematic. _ R = R f + ( R m - R f) x    β (beta) _ R = Return (expected) R f = Risk free Return The minimum return which is desire by the investor R m = Market Return The return which is provided by the market β = systematic Risk Note = when minimum then always keep the Rf value less and Rm val...
Post a Comment
Read more

TYPES OF INDEX

INDEX Index is a number which show the selling and purchasing behaviour of the security on a perticular day. it also show the economy position. Types of Index Don Jone Index30 Standard 500index KSE-100 Index Don Jone Index30: (blue chip) This index shows the selling and purchasing behaviour of the top 30 companies of a country if this index decline then it provide the negative signal to the international market about the economy of the country. blue chip: top 30 companies that have high market share. Standard 500 index: This index show the 500 countires selling and purchasing behaviour. KSE-100 Index: This index show the 100 comapnies selling and purchasing behaviour (top + middle + low level) INVESTMENT AND PORTFOLIO MANAGEMENT INVESTMENT VS SPECULATION AND GAMBLING TYPES OF INVESTOR INVESTMENT COMPANIES TYPES OF MUTUAL FUNDS TYPES OF BONDS FUNDS MONEY MARKET FUNDS SECURITIES MARKET TYPES OF INDEX TYPES OF BROKERS BROKER'S ACCOUNT MAR...
Post a Comment
Read more

RISK PORTFOLIO ANALYSIS

RISK PORTFOLIO ANALYSIS For risk analysis we use the correlation and we check the variable dependable or nondependable each others. Rules: If variables answers will be (+ve) then variable dependable or if the variables answer are (-ve) then nondependable. (+ve) risky protfolio (-ve) less risky protfolio Correlation: It show the relationship between two or more than two variable If the answer of the correlation is positive it indicate that the securities in the portfolio are depend on each other and this protfolio is a risky portfolio. If the answer of correlation is negative it indicate that the securiteis in the protfolio are not depend on each other and this protfolio is called less risky protfolio. Example: A group securities       NBP , Nestle     answer (+0.05) B group Securites       Lucky, NBP      answer ((-0.03) Decision: risk taker will choose option A risk avioder will choose option B S.D = ri...
Post a Comment
Read more