1、EssentialsforFinancialStatementsAnalysisGibson.C.H. Journal of Financial Statement Analysis Vol.12 No.2,2009Overview of financial statements analysisThe analysis of financial data employs various techniques to emphasizethe comparative and relative importance of the data presented and toevaluate the

2、position of the firm. These techniques include ratio analysis,common size analysis, review of descriptive material, and comparisons ofresults with other types of data. The information derived from these types ofanalyses should be blended to determine the overall financial position. No onetype of ana

3、lysis supports overall findings or serves all types of users. Youhave to select two listed companies existing in the same industry (e.g.Unilever and Proctor and Gamble in the food and personal care products, etc)Get their financial statements for the most recent three years and Perform theafore-ment

4、ioned analysis.Financial Analysis techniques such as ratio analysis and common sizefinancial statements can provide valuable insight into a companys operations,risk characteristics, and valuation beyond what is readily apparent byexamining raw data. When data is presented analytically, differences a

5、crosstimeperiods,interrelationshipsoffinancialstatementaccountsandcomparisons among companies, are more easily understood. An effectiveanalysisencompassesbothcomputationsandinterpretations.Awellreasoned analysis differs from a mere complication of various pieces ofinformation,computations,tables,and

6、graphsbyintegratingthedatacollected into a cohesive whole. Analysis of the past performance, forexample, should address not only what happened but also why it happenedand whether it advanced companys strategy. Some of the key questions toaddress include:What aspects of performance are critical for t

7、his company to successfullycompete in the industry?How well did the companys performance meet these critical aspects? (Thisisestablishedthroughcomputationsandcomparisonwithappropriatebenchmarks,suchasthecompanysownhistoricalperformanceorcompetitors performance.)What are the key causes of this perfor

8、mance, and how would thisperformance affect the company in the future?What is the likely impact of trends in the company, industry, and economy onthe future cash flows?What are your recommendations as an analyst?Financial Analysis TechniquesThe following techniques can help you in achieving the over

9、all objectiveof financial statement analysis of the companies.1. Ratio AnalysisRatio Analysis Ratio analysis is the calculation and comparison of ratioswhich are derived from the information in a companys financial statements.Financial ratios are usually expressed as a percent or as times per period

10、.a) Liquidity RatiosLiquidity ratios measure a firms ability to meet its current obligations.These include Current Ratio, Acid Test Ratio, Sales to Working Capital,Working capital.b) Leverage RatiosLeverage ratios measure the degree of protection of suppliers of longterm funds. These include Time In

11、terest Earned, Fixed Charge Coverage,Debt Ratio, Debt / Equity Ratio, Debt to Tangible Net worth Ratio, CurrentWorth / Net worth Ratio, Total Capitalization Ratio, Fixed Asset Ratio / EquityRatio, Long term Assets versus Long term Debt.c) Profitability RatiosProfitability ratios measure the earning ability of a firm. These includeNet Profit Margin, Return on Assets, DuPont Return on Assets, OperatingIn