(a) Analysis of financial statements is considered to be an effective tool for analyzing the operating and financial performance of an organization. The analysis of financial statements is useful for taking practical economic decisions by various users. There are different types of tools available for the analysis of the performance of an organization. However, the horizontal and vertical analysis is a very widely used technique for developing a better understanding of financial strengths and weakness of an organization. For the purpose of this assignment, as a Financial Analyst for Middle East Venture Capital LLC, I have chosen Oman Fisheries Co. S.A.O.G.
This ratio analysis can be used to assess financial strength and weakness of a business as well as a platform to make financial decisions. It can also use for budgetary, future planning and comparison purposes. Once the financial ratios been calculated, non-finance background people including stakeholders, lenders, management, and investors will be able to comfortably mingle with finance statistics as it will highlight the necessary information of the company rather than go through the whole financial report. According to Fraser and Ormiston (2004) financial analysis can be categorized by four types of ratios which are liquidity ratio, profitability ratio, efficiency ratio and leverage ratios. However, despite the advantages of ratio analysis, certain limitations will make it less meaningful.
They use these to form a view on the company’s position in their industry, growth metrics, profitability, among other things. Technical analysis usually consists of looking at price charts of stocks to find emerging trends and repeating patterns. The bread and butter is price and volume. A wealth of oscillators and indicators, most often derivative of price and volume, are used in conjunction with price charts to capitalize on these trends and
1.1 INTRODUCTION TO FINANCIAL ANALYSIS Financial analysis converts raw information of financial statements in useful financial information. Only after financial analysis, we can use financial statements for decision making. This financial information is useful for planning, evaluating and making financial decisions. Further, financial analysis helps in assessing the past performance along with the current financial position, in order to make predictions about the future performance of the company. The process of evaluating business, projects, budget and other finance related entities to determine their suitability for investment.
used for analysis: As we all know that CAMEL is a Ratio based model also includes accounting ratio and profitability ratios. Accounting Techniques 1) Ratio Analysis: Financial ratios are those ration which helps in determining the mathematical relationship and comparisons of financial statement and these relationships between the two different financial statements help the creditors, investors, shareholders and internal management to understand how well a business is performing and where improvements are needed. Ratios help the financial institution to compare with the others in order to identify their strengths and weaknesses. 2) Comparative Statement Analysis: - A statement which compares the financial data of different periods of time. The comparative statement positions up a section of the income statement, balance sheet or cash flow statement with the corresponding section of a previous period.
Among these tools is financial ratio analysis used for comparative purposes. Aside from it, the annual financial statements can be analyzed using horizontal analysis which highlights the trend of various figures from revenue to expenses and cash flow over the reporting periods. Vertical analysis emphasizes the relative size of each item as a composition of a set of numbers such as operating expenses as a proportion of total sales revenue. When dealing with financial forecasts and business plans, historical analysis is irrelevant. Rather a forward outlook would be more appropriate.
Financial Ratio Analysis - Definition, Purpose, Advantages, and Disadvantages Firstname Lastname Institutional Affiliation Financial Ratio Analysis - Definition, Purpose, Advantages, and Disadvantages Meaning of Financial Ratios: Financial Ratios are essential quantitative financial tools that are comprehensively used by financial experts to analyze a company’s financial performance such as business evaluation, fundamental analysis, business analysis, etc. In financial ratio analysis, an expert uses ratio to study various financial parameters from a company’s financial statements such as income statement, balance sheet etc., for efficient and effect decision making. Some of the financial ratios are listed below for
Ratio Analysis The purpose of this financial analysis is to identify several aspects of the company’s financing behavior. With this ratio analysis it is to know the degree of liquidity of the company from a management perspective, how they impact the firm’s ability to leverage new distinctive competences. The ratios that will be presented below are used in comparision to other companies in your industry and internal benchmarks. Profitability Ratios. These ratios come from your company’s income statement, measuring the profitability of the shareholder or company owner, having a higher value relative to a competitor's ratio or the same ratio from a previous period
or Ratio Analysis means one number expressed in terms of another number. It shows relationship of one figure with another figures is called as ratio analysis. For example: Current ratios. Since ratios are future-oriented, the analyst must be able to adjust the factors present in a relationship to their probable shape and size in future. Thus, in the final analysis, the usefulness of ratio is wholly dependent on their intelligent and skilful interpretation.
Introduction Financial statements provide vital statistics about business’s internal accounts. Albeit these figures are useful they carry less weight, than performing accurate analysis using accounting ratios and comparing it with either the previous year’s ratios, or with the same averages of industry competitors. Section 1 For this the assignment, ratio analysis was performed evaluating BCX’s performance during the past 5 years, focusing on the following ratios: Profit margin Asset Turnover Return on Asset Return on Equity Debt to Equity Ratio Equity Multiplier Figure 2: Ratio Results Section 2 Identifying five external factors that impacted on BCX’s performance the previous five years. 2.1 Profit margin Simply defined as