Financial analysis is analysing of all the financial characteristics like the strength and weakness of a business firm and by creating a link between the elements of the balance sheets and the income statement. Thus it is the analysis of fundamental and key features like liquidity solvency, profit and also the efficiency of the operations of a business entity. This way we can identify the weakness and work on it so that in future it can help us.
There are numerous students who try to solve questions and find it hard to find the financial analysis homework answers. It is recommended for them to go through all the topics that can affect the analysis of the following analysis techniques.
There are many types of financial analysis, like:
- Internal Analysis
This is generally done by the accounting department and also by the finance department. The main objective of this process is to help in the decision-making process and also deliver the information to the top management
- Short term Analysis
This is mainly concerned with the analysis of the working capital. Mainly involves the current liabilities and also the analysis of the current assets. Thus the liquidity can be determined.
- External Analysis
It is mainly done on the basis of published financial statements by those who have no access to the accounting information, like the general public, stockholders, etc.
- Vertical Analysis
Also termed as the static analysis, this is done when a financial ratio is prepared over a period of one year. There are many techniques involved in it which you can find in excellently written financial analysis homework answers help manuals.
- Ratio Analysis
One of the most popular ways to analyse the statement is by computing the ratios of financial statement. It is highly popular and mainly used for its efficiency. It highlights on the mainly featured indicators like the solvency, profitability or even the liquidity of a business entity. The main tool of the ratio analysis performs in a typical way so that it makes simple and easy financial statement. Also besides that, it also tells a lot about the condition of financial stress of the business.
- Statement of common size
Generally, the financial statement figures are being converted to percentages. It is mainly done by taking the whole value of the balance sheet as 100. Thus, by this, the ratio of each asset to total assets and the ratio of each liability to total liability, the calculations are done. Consequently, it actually shows the relation of each individual component to the whole body.
- Trend Analysis
One of the key tools is horizontal analysis. Different items of financial statements are taken in ratio and then finally the comparison is made based on the final calculation. This analysis is an important tool to identify that whether the financial health of the business is developing or not in its course.
- Comparison of financial statements
It is another important tool to identify and compare between any two financial statements. It is another tool for the horizontal analysis and can be applied to income statements, balance sheet and financial statement. It can help to analyse and bring out the meaningful data when compared to similar data for the previous periods.
This comparison and the view it brings about in its statement of income helps us to review the performance and draw some conclusions for developing in the near future. Hence, a change from one period to another can easily be attained.
- Working capital changes and its statement
The main target of this analysis is to extract all the information relating to the working capital. The net amount capital can be calculated by subtracting the present liabilities from the current assets. Thus the statement of working capital changes can actually provide a much important relation between 2 financial time periods.
- Horizontal analysis
It is also known as the dynamic analysis. It helps to analyse the dynamic change of the financial statements for some number of years.
These are the main techniques that should be kept in mind while solving financial analysis homework answers. There are many sites that offer courses on this sites that includes from free courses to paid ones, and you can choose from there that suits you the best. Financial analysis homework answers are quite tough to solve. So, going through the internet to find a particular solution might not be helpful. Sometimes it is best to seek help from someone who has some expertise in this field. This is because they can offer you a better understanding of the topic. Also, you can learn some valuable tricks and shortcut methods in solving and finding the financial analysis homework answers.
Again moving back to the topic, let us consider the key elements in a proper analysis:
- Revenues
- Revenue per employee(revenue divided by the average number of employee)
- Growth of revenue(revenue of this period- revenue of the last term)
- Concentration of revenue( client’s revenue divided by the total amount of revenue)
- Efficient operation
- Inventory turnover( cost of the goods sold divided by the average inventory)
- Accounts receivable turnover(net creditable sale divided by the average receivable accounts)
- Liquidity
- Coverage of interest( earnings before the interest and taxes divided by the expenses of the interest)
- Current ratio (current assets divided by the current liabilities)
- Profits
- Gross profit margin – ( revenues – sold goods amount) divided by revenues
- Net margin profit – (revenues-expenses on operation – cost of goods sold – other expenses divided by the revenues.
- Operating margin profit – (revenues –total cost of goods sold – operating expenses) divided by the revenues
- Solvency and Efficiency of Capital
These are of interest mainly to the lenders and the investors:
- Equity returns (net income / shareholders equity) which actually show the returns generating from the business by the investors.
- Debt to equity (debt / equity) this can vary depending upon different conditions mainly on how much leverage an individual is using to operate.