Analyzing Financial Statements (Ratio Analysis)
1. Users of Financial Statement Analysis
There are a number of users of financial statement analysis. They are:
- Creditors. Anyone who has lent funds to a company is interested in its ability to pay back the debt, and so will focus on various cash flow measures.
- Investors. Both current and prospective investors examine financial statements to learn about a company’s ability to continue issuing dividends, or to generate cash flow, or to continue growing at its historical rate (depending upon their investment’s experience).
Management. The board of directors in preparing an ongoing analysis of the company’s financial results, particularly in relation to a number of operational metrics that are not seen by outside entities (such as the cost per delivery, cost per distribution channel, profit by product, and so forth). Any wrong decision made will be resulting to financial LOSS!
Regulatory authorities. If a company is publicly held, its financial statements are examined by the Securities Commission Malaysia (SC) www.sc.com.my to see if its statements conform to the various accounting standards in Malaysia.
2. Ratio Analyzing
The Ratio Analyzing on Financial Statements excluding advisory will be FROM RM 600.00 while a consultancy session of ratios discussion will be starts FROM RM 250.00. All you need to do is to provide us your Profit & Loss Accounts, Balance Sheet, Debtor and Creditors Aging.
a. The Profitability Ratios (Gross profit margin, operating profit margin & net profit margin): The ratios are about to tell you that is the business making profit after your sales activity;
b. The Liquidity Ratios (Current ratio & Quick ratio): where in generally is to check is that your company able to cover the financial obligations or liabilities;
c. The Operating Ratios (Inventory turnover ratio, Average collection period, Return on Assets & Return on Investments): to check in that your investments, time and effort are to waste or making PROFITS!
d. The Solvency Ratios (Debt to worth ratio & Working Capital): to check is your company ready for financial difficult periods.