Financial Analysis Flashcards
Financial Analysis – Factors in Assessing Strategy
Financial risk
Financial return
Funding
Financial Decisions
Investment decisions
Financial decisions
Dividend decisions
Financial Decisions – Investment
Identify investment opportunities & decide which ones should be accepted
Financial Decisions – Financial
How should the organisation be financed in the long- & short-term
Financial Decisions – Dividends
How much to pay out as dividend to shareholders
Impact of Technology on Financial Decisions
Big Data
Cloud computing
Predictive analytics
Risk
Situations or events which may or may not occur but whose probability of occurrence can be calculated statistically & the frequency predicted
Uncertainty
Situations or events whose outcome cannot be predicted with statistical confidence
EV
Expected Value
Weighted average value based on probability
Forecasting – Advantages
Helps effective planning
Helps better co-ordination
Helps co-operation
Control
Forecasting – Disadvantages
Based on assumptions
Based on historical data
Inadequate data
Over-reliance
Budget
Short-term, financial business plan
Converts the strategic plans into specific targets
Ratios
Gross profit (GP/Rev)
Operating profit (OP/Rev)
Net profit (EBIT/Rev)
Gearing (D/D+E)
ROCE (PBIT/Equity)
Interest cover (EBIT+Intrst/Intrst)
Asset turnover (Rev/CE)
Current ratio (CA/CL)
Quick ratio (CA-Inv/CL)
Inventory days (lnv/Salesx365)
Debtors days (Recs/Salesx365)
Creditors days (Pays/Purchsx365)
