Financial Statement Analysis

Financial Statement Analysis

FINANCIAL STATEMENT AND ITS ANALYSIS Financial statement analysis is the biggest part of quantitative analysis. It involves looking at historical performance data to estimate the future performance. Followers of quantitative analysis want as much data as they can find on revenue, expenses, assets, liabilities, and all the other financial aspects of a company. The massive amount of numbers in a company's financial statement can be confusing and scary to many investors. On the other hand, if you know how to read them, the financial statements are a gold mine of information. To learn and understand the financial situation of a business whether you are a part of management, an investor, creditor or lender, or a partner, the first step is the examination of the firm’s basic financial statement. Each group is interested in different things. For example: -An investor might assess profitability, growth, stability, and the rate of dividends. -On the other hand, a creditor is much more interested in the amount of debt that a company currently has and whether it has the ability to make repayments.

Continue Reading

Differences between Profit and Nonprofit Accounting

Differences between Profit and Nonprofit Accounting in Financial statement analysis :

Financial statement analysis Differences between for-profit and non-profit organizations Organizational differences • Different orientation toward the bottom line. • Although both must comply with GAAP and FASB, SEC monitors for-profit organization accounting. IRS and state regulator monitor non-for profit. Governmental accounting has a separate set of rules. Other differences in stakeholders • Investors versus donors or government agencies • IRS: need to comply with 501( c) 3 (and other) requirements • Need to maintain credibility and respect of community Resulting differences • Fund accounting – restricted, temporarily restricted, permanently restricted accounts – endowment, agency, enterprise funds Other differences • Separation of expenses into functional categories – Program – Administrative – Fundraising Other differences • Closer links between IRS Form 990 requirements and financial statements Similarities • Need to look at one organization across time – need consistent accounting procedures – need to understand the footnotes Need for information from different perspectives • Balance sheet--snap shot • Cash flow statement--solvency • Activities (income statement)--Matching Ratio analysis • Same basic ratios for solvency, liquidity, profitability (less important) with some additional issues.

Continue Reading