Financial Analysis For A Business Management

One purpose of making financial statements by managements is to reflect company’s operation and financial situations, which can provide benefit information for decision making level. Another aspects is creditors and investors seek to better investment decision after they analyze financial statements. Therefore, it is very important to management level, creditors and investors through evaluating corporation’s financial status objectively. And we can analyze through three parts, which is operation activities, investing activities and financial

According to Buchbinder & Shanks (2012, p. 204), cash budget defined as “the necessary step that allows the organization to determine how to optimize the value of the cash being generated by its operations. More interestingly, this also defined as a forecast of cash inflows, cash outflows and net lending and borrowing needs for the months ahead”. From the point of what I understand the discussed definition of a cash budget, it looks like similar to operating budget however, there is a certain difference. A cash budget is simply a forecast of the operating budget. It looks both cash inflows and outflows as well as lending and borrowing needs in an organization.

Ratio analysis is known as the analysis of the financial statement that used by the company to compare the statements within the years of the company itself, or with another companies. (Siddiqu, 2008)

All businesses have a large amount of stakeholders. Pauline (2013) defined that stakeholder is a general term to indicate all those who might have a legitimate interest in receiving financial information about a business because they have a ‘stake’ in it. All stakeholders must need accounting information to help them making better decision. Most of the businesses have provided different sort of accounting information like balance sheet and income statement. However, no all the stakeholders need the same information and the purpose is different. Therefore, the main question is what information is required and the proper use of the information. In the following of the passage, it will discuss about the question from different stakeholders.

Apart from the level of financial accounting, the ratio is one measure of performance can be made by the organization. Ratio is intended to make a comparison between two or more of a decision. The ratio of interest is to have a profound meaning which, when it is compared with other ratios. Examples of such ratios can reinforce an opinion on the

Financial statements are used to determine the business activities of a firm and the role of accounting analysis is to determine the accuracy and quality of the information provided. This analysis would look into the degree of its accounting figures captures its business reality through the policies used and its resulting noise, potential forecast errors and its impact on Myer’s profit.

Charles_T._Horngren (2005) stated that “people perform financial analysis for different reasons, Supplier want to see if a customer can afford a price hike, Customers want to know if a company will still be around in a year to honor a warranty, Managers, creditors, investors, and the CEO’s all have their reasons for reading the statements, regardless of your interest in the company. Financial statement analysis involves using financial data to assess some aspect of a company’s performance” Horngren added ”Although many analysis methods exist, the cornerstone of financial statement analysis is the use of ratios”

The Financial Statements are generally prepared for the measurement of financial position of a particular company for a particular period of time. Financial statement analysis is structural and logical way to present overall financial performance of an organization. It’s also helps in evaluating and analyzing the liquidity and profitability position of the business which can be used for decision making for business

Abstract : Analysis of financial statement of a company is an important because it is useful to obtain Information

The aim of this report is to recommend whether or not a publicly traded company has been is worth investing in. The company chosen in this case is JPMorgan & Chase which is a large financial institution. This report is going to use a financial rational formed by the analysis of various financial metrics.

The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns for its shareholders. This is made possible if the business is able to maximize on available opportunities and very efficiently and effectively use the resources it has to create maximum value for all involved stakeholders. One way the performance of a company can be measured on critical areas such as profitability, its ability to stay solvent, the amount of debt exposure and the effectiveness in resource utilization, is performing financial analysis where a set of ratios provides a snapshot of company performance

Ratio analysis is a technique of analysis and interpretation of financial statements. However ratio analysis is not an end in itself. It is only a mean of better understanding of financial strengths and weaknesses of a firm. Calculation of mere ratio does not serve any purpose, unless several appropriate ratios are analyzed and interpreted. There are number of ratios which can be calculated from the information given in the financial, statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective of analysis.

Ratios divide different financial statements into one another, they determine trends and changes in financial statement quantities and are used to standardize balance sheet and income statement numbers. (Melicher, R. W., & Norton, E. A. (2013).

Firms and Companies include ‘Ratios’ in their external report to which it can be referred as ‘highlights’. Only with the help of ratios the financial statements are meaningful. It is therefore, not surprising that ratio analysis feature are prominently in the literature on financial management. According to Mcleary (1992) ratio means “an expression of a relationship between any two figures or groups of figures in the financial statements of an undertaking”.

Ratio analysis is generally used by the company to provide some information on how the company has performed during that year, so that the parties involved including shareholders, lenders, investors, government and other users could make some analysis before making any further decision towards that particular company. As mentioned by Gibson (1982a cited in British Accounting Review, 2002 pg. 290) where he believes that the use of ratio analysis is such an effective tool to evaluate the company’s finance, and to predict its future financial state. Ratios are simply divided in several categories; these are the profitability, liquidity, efficiency and gearing.