Financial performance thus, is the quality of management of assets in a specific business firm from the starting point to the result; revenues of the firm. Financial performance can be measured depending on several factors, and this measure provides us with a good indicator whether the firm is financially healthy or not. The indicators of the financial status of a specific business are directly related to the statistical relations between its financial account components. These statistical relations are summarized by ratios that determine the financial stability of the business according to a chart of comparison and can be used also to determine the future financial balance of the business. Financial performance is measured based on the following indicators: Profitability, Liquidity, Solvency and Financial efficiency.
Financial performance analysis is the process of identifying the financial strengths weaknesses of the firm by properly establishing the relationship between the item of balance sheet and profit and loss account. It also helps in short-term and long term forecasting and growth can be identified with the help of financial performance analysis. The directory meaning of analysis is to resolve or separate a thing in to its element or components parts for tracing their relation to the things as whole and to each other. The analysis of financial statement is a process of evaluating the relationship between the components parts of financial statement to obtain a better understanding of the firms position and performance. This
One of foundation of financial planning analysis and decision making is the financial information. It’s needed to forecast the financial statements to relate and also assessitsbusiness’sgrossingcapability. Financial decision making investment and financing decision making is also required. The financial information of an enterprise is contained in the financial statements. Its usage of financial statement analysis in investment decision has been addressed by a series of authors.
The Capital Asset Pricing Model is for the most part utilized by money related organizations, and monetary security organizations, to see regardless of whether a speculator ought to go for broke, or if the stock he as of now possesses is underestimated or exaggerated, in different terms, when to offer and when not to offer stock, and regardless of whether to purchase it (or go out on a limb). The Theory is likewise used to gauge organizations costs as far as their value capital. Organizations likewise utilize it as an apparatus or technique for measuring an organizations money related markets value securities and along these lines decide expected profits for their capital. As a general synopsis to the majority of that The general thought behind CAPM is for speculators to be prize in two routes for their venture: time estimation of cash and hazard, this implies they get a reasonable measure of cash regarding the danger rate and the time estimation of the cash he contributed. At the point when connected the financial specialist is prize for the cash he/she contributed over a timeframe, furthermore the additional sum he/she as far as the danger.
The process involves gathering relevant financial information, setting financial goals, scrutinizing your current financial position and coming up with an approach or plot for how you can encounter your goals given your current condition and future plans. Financial Planning provides direction and connotation to your financial decisions. It allows you to comprehend how each financial decision you make affects other areas of your finances. By observing each financial decision as part of the whole, you can consider its short and long-term effects on your financial goals. You can also adapt more easily to financial changes and feel more secure that your goals are on track.
1. Please describe the role of an investment advisor? What are the outcomes for a good advisor? In which case the client and the advisor will be in “win-win situation”? Investment advisors provide clients, which are the individual investors advice on financial matters including financial planning and selling securities and make recommendations on the on ways to best utilize their money.
3. Introduction to Financial Ratios Financial ratios are dealings determined from a firm's financial information and used for comparison purposes in financial means. Some of the financial ratios are Profitability ratios, Liquid ratios, Capital structure ratios, Assets management ratios and Market value ratios. Sub-categories of these ratios are defined below. 3.1 Profitability Ratios A category of financial metrics used to evaluate a business's ability to generate profit as compared to its expenses and other relevant costs earned during a specific period of time.
It is essential for all management to use capital budgeting techniques to decide which projects will make the highest return. Subsequently, if there are no capitalist restrictions or any other restrictions, shareholder value is then extended by selecting the positive Net Present Value (NPV) projects (Bennouna, Meredith and Marchant, 2010). As mentioned, the CAPM is used to estimate the cost of equity for project selection, and cost of equity is basically a key factor of stock valuation. The CAPM is a theoretical representation of the behavior of the financial market and it can be employed to estimate the company’s cost of equity capital. It is a rate of return that convinces investors make an investment, especially long-term investment decisions (Da, Guo and Jagannathan, 2012).
A buy-side engagement shall include the following: Target Identification – it usually requires significant knowledge or market research to assess the potential firms which match the criteria of the buyers. Target Assessment – This involves mandatory research on the financial performance of the target as well as the existing management team for determining if it fits in the overall future plans of the acquirer. Valuation – This typically includes value of the target based on the position in the specific industry or what the buyer is willing to pay. Structuring – This involves making assessment on what capital structure suits best for the buyer while satisfying the expectations of the target. Letter of Intent (LOI) – This step consists of crafting and presenting the LOI on behalf of the buyer.
Maintaining financial plans enable business companies to control their cash flows and make right decisions in tough situations. Budget mostly represents an analysis of how a business company anticipates to spend cash in future period. Many business companies budget a plan for only income statement, however, it is also important to budget balance sheet for full analysis.