Escolar Documentos
Profissional Documentos
Cultura Documentos
01 FINANCIAL STATEMENT
ANALYSIS
J. VILLENA, CPA
HORIZONTAL ANALYSIS
- Presents the differences in absolute amount and in percentage between two
periods.
- % of change = Amount of Change / Base
SAMPLE PROBLEM 1
DAVID Corporation
Balance Sheet
Comparative figures of December 31, 2015 and 2016
Increase (Decrease)
Assets 2015 2016 Amount Percenta
ge
Cash and Cash Equivalents 400 600 200 50
Trade and other receivables 2,600 2.900 300 12
Inventories 1,200 1,000 (200) (17)
Long term investments 2,000 2,200 200 10
Property and equipment 4,000 4,400 400 10
Other assets 0 400 400 0
Total Assets 10,2 11,50 1,300 13
00 0
LIABILITIES & EQUITY
Trade and other payables 3,000 3,500 500 17
Bond Payable 500 400 (100) 20
Discount on bonds payable (20) (18) (2) 0
Ordinary Share Capital 3,100 3,200 100 3
Share Premium 2,000 2,200 200 10
Retained Earnings 1,620 2,218 598 37
Total Liabilities and Equity 10,2 11,50 1,300 13
00 0
Page 1 of 8 BSA 3A
ACT08-FINANCIAL MANAGEMENT 1
01 FINANCIAL STATEMENT
ANALYSIS
J. VILLENA, CPA
TREND ANALYSIS
- The purpose of trend analysis is to track down what happened in the past and
provide a pattern on what may happen in the coming years.
SAMPLE PROBLEM 2
VERTICAL ANALYSIS
- Gets the proportional component of each of the variables in the financial
statements in relation to a chosen base (100%).
- By expressing the financial data in percentage using a particular base, the size
of different companies is brought to a common expression.
SAMPLE PROBLEM 3
Let us assume the following income statement data of two companies, Alden
and Maine Corporation.
The Sales return and allowances for Alden and Maine Corporation were P3.6
million and 400,000 respectively.
Page 2 of 8 BSA 3A
ACT08-FINANCIAL MANAGEMENT 1
01 FINANCIAL STATEMENT
ANALYSIS
J. VILLENA, CPA
RATIO ANALYSIS
1. Profitability Ratios
2. Growth Ratios
3. Liquidity Ratios
4. Leverage Ratios
PROFITABILITY RATIOS
Return on Sales (ROS) = Profit/Net Sales
Return on Asset (ROA)= Profit/ Average Total Assets
Return on Equity (ROE) = Profit/Average Equity
Return on Ordinary Equity= Profit - Preference Dividends
Average Ordinary SHE
Earnings per Share (EPS) = Profit-Preference Dividends
Average shares outstanding
SAMPLE PROBLEM 4
The following selected data were taken from the financial records of GMA
Corporation.
Net Income P 1,000,000
Average total assets 12,000,000
Net Sales 20,000,000
10% cumulative preference shares, P100 par,
Liquidation value, P120, 20,000 shares issued 2,000,000
Ordinary Shares, P30 par, 220,000 shares issued, 6,600,000
treasury Shares, 20,000
Page 3 of 8 BSA 3A
ACT08-FINANCIAL MANAGEMENT 1
01 FINANCIAL STATEMENT
ANALYSIS
J. VILLENA, CPA
GROWTH RATIOS
Price Earnings Ratio = Market Price per share / EPS
Dividend yield ratio = Dividend per share / Market price per share
Dividend payout ratio = Dividend per share / EPS
LIQUIDITY RATIOS
Inventory Turnover = Cost of Sales / Average inventories
Receivable Turnover = Net credit sales / Average trade receivables
Payable Turnover = Net credit purchases / Average trade payables
Age = Days in a year / Turnover
Operating Cycle = Age of Inventory + Age of Receivable
Net cash cycle = Operating cycle Age of Payable
Current Ratio = Current Asset / Current Liabilities
Quick Asset Ratio = Quick Assets / Current Liabilities
Page 5 of 8 BSA 3A
ACT08-FINANCIAL MANAGEMENT 1
01 FINANCIAL STATEMENT
ANALYSIS
J. VILLENA, CPA
term obligations.
10.Quick Ratio Measures the ability of the
firms to pay its ST debts
from its most liquid asset.
11.Working Capital The amount needed in the
firms business to operate.
SAMPLE PROBLEM 6
The following selected financial data from the records of David Corporation and
Dean Corporation as of and for the year ended December 31, 2016.
David Corp. Dean Corp.
Net credit sales P60M 120M
Cost of goods sold 20M 45M
Net credit purchases 20M 43M
Average trade receivables 4M 4M
Average inventories 2M 2M
Average trade payables 3.5M 3.5M
Sales credit terms 2/10, n/30 2/10, n/30
Purchase credit terms 3/30, n/60 3/30, n/60
Dean Corporation is more efficient in managing its operating cycle because it has
shorter OC days. This explains why Dean Corporation was able to pay its creditors in
30 days and avail of 3% discount offered.
Page 6 of 8 BSA 3A
ACT08-FINANCIAL MANAGEMENT 1
01 FINANCIAL STATEMENT
ANALYSIS
J. VILLENA, CPA
SAMPLE PROBLEM 7
Say, we have two companies with the same total equity of P200 million pesos.
However, they raised the money needed to finance investments differently as
follows:
A. Co. B. Co.
Debt, 10% 40,000,000 160,000,000
Shareholders Equity 160,000,000 40,000,000
EBIT 50,000,000 50,000,000
Page 7 of 8 BSA 3A
ACT08-FINANCIAL MANAGEMENT 1
01 FINANCIAL STATEMENT
ANALYSIS
J. VILLENA, CPA
-END OF FSA-
Page 8 of 8 BSA 3A