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INTRODUCTION:FINANCIAL

ANALYSIS TOOLS

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SOCIETY

BUSINESS GOVERNMENT

CONSUMERS

ISSUES

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BUSINESS ACTIVITIES

FORMS OF BUSINESS• Sole Proprietorship• Partnership• Company

– Private Limited Company– Public Limited Company

• NGOs

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Why some companies are ‘good’ and some are ‘bad’?

“Forbes100” from 1917 to 1987: 39 members of the 1917 were alive in 1987; 18 in 1987 F100; these 18

F100 “survivors” underperformed the

market by 20%; just 2 (2%), GE & Kodak, outperformed the market 1917 to 1987.

Source: Dick Foster & Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market

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DEFINITION OF ACCOUNTING

• “Accounting is the process of –identifying, –measuring and–Communicatingeconomic information to permit

informed judgements and decisions by users of the information.”

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Definition of A/c (contd…)

• “Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, and about economic activities, that is intended to be useful in making economic decisions.”

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FINANCIAL STATEMENTS

• Statement of Financial Position (balance sheet) Assets = Shareholders’ Capital + Outside

Liabilities.

• Statement of Comprehensive Income (profit & loss)

• Statement of Cash Flows • Statement of Changes in Equity

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OBJECTIVE OF FS

USERS’ INFORMATION NEEDS

• 1) Liquidity

• 2) Profitability

• 3) Solvency

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USERS OF FIN. ST.

• PRESENT & POTENTIAL SHAREHOLDERS / TRUSTEES / MEMBERS

• EMPLOYEES• LENDERS• SUPPLIERS & OTHER CREDITORS• CUSTOMERS• GOVERNMENT & ITS AGENCIES• PUBLIC

Relationships

elect

report

electreview

account

Shareholders

Auditors

Directors

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TYPES OF ACCOUNTING

• Financial accounting

• Income-tax accounting

• Cost accounting

• Management Accounting (Management Control Systems)

• Management Reporting

Annual Report Discussion

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Thank you

The two most beautiful words in the English language are 'cheque enclosed‘.(Dorothy Parker)