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Home » Finance Homework Help » Financial and Profit Analysis
Financial and Profit Analysis
Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm, or by parties outside the firm, viz. owners, creditors, investors and others. The nature of analysis will differ depending on the purpose of the analyst.

Trade creditors: - are interested in firm’s ability to meet their claims over a very short period of time. Their analysis will, therefore, confine to the evaluation of the firm’ liquidity position.

Suppliers of long-term debt: - on the other hand, are concerned with the firm’s long-term solvency and survival. They analyze the firm’s profitability over time, its ability to generate cash to be able to pay interest and repay principal and the relationship between various sources of funds (capital structure relationships). Long-term creditors do analyze the historical financial statements, but they place more emphasis on the firm’s projected, or preformed, financial statements to make analysis about its future solvency and profitability.

Investors: - who have invested their money in the firm’s shares are most concerned about the firm’s earnings. They restore more confidence in those firms that show steady growth in earnings. as such they concentrate on the analysis of the firm’s present and future profitability. They are also interested in the firm’s financial structure to the extent it influences the firm’s financial structure to the extent it influences the firm’s earnings ability and risk.

Management: - of the firm would be interested in every aspect of the financial analysis. It is their overall responsibility to see that the resources of the firm are used most effectively and efficiently, and that the firm’s financial condition is sound.

Some of its important topics are:

1. Balance sheet
2. Financial analysis and firm's earning power
3. Financial planning
4. Qross profit and inventory turnover
5. Profit and its concepts
6. Profit and loss account and funds
7. Ratio analysis
8. Sources  of cash
9. Standard of comparison and expense ratio
10. Types of ratios
11. Utility of ratio analysis
12. Working capital flow-sources and uses

Financial and Profit analysis homework help, homework help and online tutoring available at the theglobaltutors.co.uk for all students from college, undergraduates, master and university level.



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