financial intelligence ppt babasba patil

Financial Intelligence

Meaning

Skill sets

Understanding the foundation

Understanding the art

Understanding analysis

Understanding the big picture

Speak the language – Finance is the language of the business, common denominator across the organisation.

Use the language to be taken seriously and to communicate effectively.

Ask questions

Look at financial reports with a questioning eye

Use the information

- to improve cash flow

- assess the company’s results

Benefits of financial literacy

Increased ability to critically evaluate companies

Better decision making- ROI / Accounts receivable

Can I spend more money since my company is profitable

Strength and balance throughout the organisation – HR / Mktg/ IT

Analysis of Financial Statements

Business AnalysisTypes of Business Analysis

Credit Analysis

Equity Analysis

Business Environment and strategy Analysis

Financial Analysis

Prospective Analysis

Valuation

Roadmap to Financial AnalysisBusiness Analysis

Business Environment Analysis – Company’s economic & industry circumstances, SWOT Analysis , industry analysis

Business strategy Analysis – Company’s business decisions leading to a competitive advantage , its product mix , cost structure

Company profile and significant events

Company shareholding pattern

Company Analysis

Financial performanceRevenuesProfitabilityAsset UtilisationCash flowsWorking capital Management

Stock performance

Users of financial statements

Contents of annual report

Tools for financial analysis

- Ratios- Percentage calculations – CAGR / YOY - Indexation of numbers- Comparison with relevant data

Road map for financial analysis of a company

Business of the company

Shareholding pattern

Profit & Loss Account

- Installed capacity & utilisation

- Sales

- Profitability Analysis

- Interest costs

- Changes in accounting policies

Balance Sheet

- Share capital

- Reserves

- Tangible net worth

- Contingent liabilities

- Debt composition

- Movement in fixed assets, capital work in progress & investments

Cash flows

- Operating cash flows

- Investing cash flows

1. RPAT

2. ROGNW

3. ROCE

4. ROE

5. Earning per share

6. Price Dividend per share

7. NAV per share

8. OPBDIT

9. OPBDT

10. OPBT

Venus Music corner provides is in the business of providing audio CDs to customers. During March the accounts were maintained by a professional accountant On March 31 , the records showed a balance of Rs.21140 in his capital account. Since he could not afford an accountant, he starts maintaining the accounting records himself. He prepared the statements for the month of April 2010 and was shocked to find that his business had not fared well. He wants you to review his statements.

Profit & Loss A/c for the month ended April’10

Expenses Revenues

Salaries 5600 Investments by owner in business 3000

Electricity 410 Unearned service revenue 600

Advertisement 130

Rent 300

Drawings 4000 Loss for the month 6840

10440 10440

Balance Sheet as on April 30

Liabilities Assets

Creditors 2510 Recording equipment 25500

Service revenue Supplies 2190

earned 12660 Debtors 1210

Capital 14300 Cash 570

29470 29470