Financial Statement Analysis



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Financial Statements

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Financial Statements

  • Financial statements provide information about the financial activities and position of a firm.
  • Important financial statements are:
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Balance Sheet

  • Balance sheet indicates the financial condition of a firm at a specific point of time. It contains information about the firm’s: assets, liabilities and equity.
  • Assets are always equal to equity and liabilities:
  • Assets = Equity + Liabilities
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Assets

  • Assets are economic resources or properties owned by the firm.
  • There are two types of assets:
    • Non-Current Assets
    • Current Assets
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Current Assets

  • Current assets (liquid assets) are those which can be converted into cash within a year in the normal course of business. Current assets include:
    • Cash and bank balance
    • Accounts receivable (debtors)
    • Inventory (stocks)
    • Advances to suppliers
    • Prepaid expenses
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Non-Current Assets

  • Non-Current assets are long-term assets.
    • Tangible fixed assets are physical assets like plant.
    • Intangible fixed assets are the firm’s rights and claims, such as patents, copyrights, goodwill etc.
    • Gross block represent all tangible assets at acquisition costs.
    • Net block is gross block net of depreciation.
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