Financial analysis of the enterprise

Question 1

Financial statements

Answer 1

a formal statement of the company’s financial activities in accordance with accounting principles

Question 2

Financial reporting

Answer 2

1) Obligation to draw up reports

2) International rules

Question 3

Why do companies publish financial statements?

Answer 3

1) This is important information about the financial condition of the company for market participants

Question 4

Structure of the financial statements

Answer 4

1) Balance sheets
2) Income Statement
3) Statement of changes in equity
4) Statement of cash flows

Question 5

What is the role of income statement in Structure of the financial statements

Answer 5

2)	Income Statement
•	Revenue
•	Costs
•	Information about profit or loss
•	Taxes

Question 6

What is the role of the statement of changes in equity of the financial statements

Answer 6

• The essence of the changes

* Cause of changes

Question 7

What is the role of the Statement of cash flows in the financial statements?

Answer 7

• Changes in assets and liabilities
• Takes into account the sources of use of cash flows
• Allows you to apply for the company’s liquidity

in other words

The Statement of Cash Flows is a great place to get started, including looking at each of the three main sections:
operating activities, investing activities, and financing activities.

Common examples of cash flow analysis include:

Operating Cash Flow (OCF)
Free Cash Flow (FCF)
Free Cash Flow to the Firm (FCFF)
Free Cash Flow to Equity (FCFE)

Question 8

what is Horizontal analysis (trend analysis)

Answer 8

• Comparison of individual items from the report with items from previous years
• Usually includes 5 years

Question 9

Vertical analysis

Answer 9

• Comparing companies with each other
• Balance sheet items expressed as an interest in assets
• Items in the income statement are expressed as a share of sales

Question 10

Analyze segmentowa

Answer 10

• Presentation of individual areas of activity

* Disadvantage – lack of objective criteria for distribution

Question 11

Indicator analysis

Answer 11

• Searching for answers to the questions: does the company have the ability to meet its obligations? Is it profitable? Is it a good investment?

Question 12

Profitability?

Answer 12

1) Comparison of the company’s profits with the investments made
2) Return on equity ROE = profit or loss/equity
3) Return on assets ROA = Profit or loss/total assets
4) Return on net assets = similarly

Question 13

Assessment of ROA/ROE indicators

Answer 13

1) Comparison with previous periods or competing companies
2) Comparison with the potential result – in this way you can check whether you should not sell the company and invest the acquired capital in a different way

Question 14

ROA analysis

Answer 14

1) You can analyze which areas of the company’s operations are the most profitable

Question 15

Solvency and liquidity ratio

Answer 15

1) Important for investors
2) Comparison of assets and liabilities
3) Consideration of the term structure of liabilities

Question 16

Liquidity

Answer 16

1) The subject of the analysis are assets that can be used to repay short-term liabilities
2) Current ratio CR = current assets/current liabilities
3) Acid test ratio ATR = (current assets – inventories)/liabilities

Cash ratio
Net working capital

Question 17

Solvency of the company

Answer 17

1) To check whether a company can meet its long-term obligations, you should analyze its capital structure
2) The most important is the relation of foreign capital to its own (the less foreign the safer)
3) Ratios: debt/(equity + debt), debt/assets

Question 18

Assessment of the solvency ratio

Answer 18

1) In different countries it will be different due to different types of financing of activities (e.g. in the banking system in Germany or Italy, the share of capital will be higher than in the UK where financing is usually carried out through the issue of shares)

Question 19

Multi-indicator analysis z-score

Answer 19

1) Helps predict company bankruptcy

2) Some complicated formula that no one will remember anyway

Question 20

Synthetic analysis

Answer 20

1) Reduction in the number of indicators
2) Comparability between companies
3) Applications of synthetic analysis: M&A, creditworthiness assessment, investment decisions, valuation of various types of risk