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Monday, 30-Apr-2012 06:00 Email | Share | | Bookmark
financial ratio analysis Strategies - Helpful Questions

>"]Financial ratio analysis

Ratios are a tool for expressing the relationship between various accounting data that can be used for both internal and external comparisons. Financial Ratio analysis as a whole is used for evaluating the financial condition and performance of a business.
Continuing with our example:
Suppose your chocolate business is now two years old, and you want to compare your organizations performance with the competitors and also your past performance with the current years. So you called your accountant and asked him the way to do so.
Your accountant suggests to you the ratio analysis and also narrates its advantages and disadvantages of it.
Advantages of Financial Ratio Analysis
1. Helpful for forecasting the future earnings and cash flows.
2. Helpful in comparative analysis.
3. It helps in evaluating the financial position and operating efficiency of a business.
Disadvantages of Financial Ratio Analysis
1. Financial Ratios are only meaningful when compared to the historical performance or externally to other firms.
2. Different firm follows different accounting principles which make comparisons among firm meaningless.
Financial Ratios Templates to download
I have created a Financial Ratios template for you, where the subheadings are given and you have to link the model to get the cash numbers! You candownload the same from here. You can go through the case and fill in the yellow boxes. I also recommend that you try to create this structure on your own (so that you get a hang of what information is to be recorded).
Also you can download this filled template and check, if the information you recorded, matches mine or not!

Tuesday, 3-Apr-2012 06:06 Email | Share | | Bookmark
Fiancial Statement Analysis

We already have the assumptions for modeling >"]Fiancial Statement Analysis of Facebook in place with us. In the last tutorial we had started discussing regarding projecting future P/L, B/S and CFS of Facebook. We also had released a simple template for modeling future P/L, B/S and CFS of Facebook.
Projecting future financial statements is a part of complete financial analysis, done by using the assumptions modeled for the subject company. These Projecting Fiancial Statement Analysis for Facebook (P/L, B/S and CFS) are than used in present value based formula (DCF) to access a company’s market value. Today I give you a simple hint on using assumption to model the Projecting Financial Statement for Facebook and you should try to aaa
How to model Projecting Fiancial Statement Analysis for Facebook?
Modeling future P/L Statement uses the assumptions related to each line item in the P/L statement.

Likewise modeling future B/S uses the assumptions related to each line item in the B/S.
Example of selected B/S items is given as follows:

Note: Remember to complete Balance Sheet modeling you have to link cash & cash equivalents in the balance sheet with the closing cash balance calculated in the cash flow statement.
Once future P/L & B/S is in place, modeling future cash flow statement (CFS) becomes a simple exercise because you have already categorized and linked the CFS with the P/L and B/S while modeling the historical cash flow statement. Now you just need to drag the formula till the required number of periods.
I hope you all will be able to do it correctly!!
In case you find any problem in modeling future P/L, B/S and CFS please write in our forum/blog, we will like to answer you queries.
Next Step
2moro we will release filled template of projected future financial statements (P/L, B/S & CFS), so that you can check your progress.


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