Objective of ratio analysis:

A ratio analysis is a quantitative analysis of information contained in a companys financial statements.

Ratio analysis is used to evaluate various aspects of a companys operating and financial performance
such as its efficiency, liquidity, profitability and solvency. The trend of these ratios over time is studied to
check whether they are improving or deteriorating. Ratios are also compared across different companies
in the same sector to see how they stack up, and to get an idea of comparative valuations.

Source: http://www.investopedia.com/terms/r/ratioanalysis.asp (Date: 27.12.2016)

Ratio analysis is a useful management tool that helps to improve the understanding of financial results
and trends over time, and provides key indicators of organizational performance. Managers will use ratio
analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed.
Investors may use ratio analysis to measure the results against other organizations or make judgments
concerning management effectiveness and mission impact in order to make their investment decisions.

Source: http://www.demonstratingvalue.org/resources/financial-ratio-analysis (Date: 27.12.2016)

Users of Financial Ratios:

Financial ratio analysis is aimed to assess the financial performance and determine the financial position
of an organization through its profitability, liquidity, activity, leverage and other relevant indicators. There
are many groups and individuals with diverse and conflicting interests but want to know about the
business performance or position. In the following table major users of financial statements with their
areas of interest are described.
(1) Bankers and Lenders: Use profitability, liquidity and investment because they want to know the
ability of the borrowing business in regular scheduled interest payments and repayments of principal loan
amount.

(2) Investors: Use profitability and investment because they are more interested in profitability
performance of business and safety & security of their investment and growth potential of their
investment.

(3) Government: Use profitability because government may use profit as a basis for taxation, grants and
subsidies.

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(4) Employees: Use profitability, liquidity and activity because employees will be concerned with job
security, bonus and continuance of business and wage bargaining.

(5) Customers: Use liquidity because customers will seek reassurance that the business can survive in the
short term and continue to supply.

(6) Suppliers: Use liquidity because suppliers are more interested in knowing the ability of the business
to settle its short-term obligations as and when they are due.

(7) Management: Use all ratios because management is interested in all aspects i.e., both financial
performance and financial condition of the business.

Source: http://www.financialaccountancy.org/financial-ratios/uses-of-financial-ratio-analysis/ (Date:

27.12.2016)

Objective of PESTEL:

PESTEL Analysis is a simple and widely used tool that helps to analyze the Political, Economic, Socio-
Cultural, and Technological changes in the business environment. This helps to understand the "big
picture" forces of change and, from this, take advantage of the opportunities that they present.

PESTEL Analysis is useful for four main reasons:

1. It helps to spot business or personal opportunities, and it gives advanced warning of significant
threats.

2. It reveals the direction of change within the business environment.

3. It helps to avoid starting projects that are likely to fail, for reasons beyond ones control.

4. It can help to break free of unconscious assumptions at the time of entering new market; because
it helps to develop an objective view of this new environment.

Source: https://www.mindtools.com/pages/article/newTMC_09.htm (Date: 27.12.2016)

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PESTLE is a concept which is used as a tool by companies to track the environment theyre operating in
or are planning to launch a new project/product/service etc. It gives a birds eye view of the whole
environment from many different angles that one wants to check and keep a track of while contemplating
on a certain idea/plan.

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The purpose of a PESTLE analysis is to identify all of the various external political, economic, social,
technological, legal and environmental factors that might affect a business.

Source: http://smallbusiness.chron.com/reason-use-swot-pestle-analysis-40810.html

A popular tool for identifying the external factors that affect the business operation is the PESTLE
Analysis, which can be used to help you consider Political, Economic, Social, Technological, Legal, and
Environ-mental issues. A manager goes for PESTEL analysis when the organization is:
1. Planning to launch a new product or service
2. Exploring a new route to market
3. Selling into a new country or region
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Objective of SWOT:

A SWOT (strengths, weaknesses, opportunities and threats) analysis focuses at internal and external
factors that can affect a business operation. Internal factors are the strengths and weaknesses. External
factors are the threats and opportunities. A SWOT analysis is a useful tool for brainstorming and strategic
planning. SWOT analysis can be used to-

Take advantage of a new business opportunity

Respond to new trends

Implement new technology

Deal with changes to your competitors' operations.

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Source: https://www.business.qld.gov.au/business/starting/market-customer-research/swot-analysis/uses-
swot-analysis

SWOT analysis focuses on addressing strengths, weaknesses, opportunities, and threats in business. It can
be applied to the company as a whole, or used to assess specific departments, products, and marketing
methods. Overall, it can lead to better informed decisions and stronger success.

SWOT analysis helps managers to:

Capitalize on the strengths

Reduce the effects of weaknesses

Identify opportunities as they appear

Acknowledge threats before they hit

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SWOT analysis is one very effective tool for the analysis of environmental data and information
for both, internal (strengths, weakness) and external (opportunities, threats) factors. It helps to
minimize the effect of weaknesses in your business, while maximizing your strengths. SWOT
analysis can help you gain insights into the past and think of possible solutions to existing or potential
problems either for an existing business or new venture.

SWOT analysis can be used for:

business planning,
strategic planning,
outsourcing a service, activity or resource,
an investment opportunity,
a method of sales distribution,
competitor evaluation,
marketing,
an investment opportunity
product development,
research reports

Source: http://www.businessplantool.org/Dokumenti/SWOT%20analysis.pdf

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SWOT is an acronym for "strengths, weaknesses, opportunities and threats." The goal of a SWOT
analysis is to create lists of all of the internal and external strengths, weaknesses, opportunities and threats
to inform strategic planning decisions. SWOT is meant to help businesses double down on strengths,
eliminate weaknesses, pursue opportunities and avoid or prepare for threats. For instance, if a small
business conducts a customer survey and discovers that everyone loves a certain product, it could divert
resources away from weaker products and put more money into developing the strong product.

Source: http://smallbusiness.chron.com/reason-use-swot-pestle-analysis-40810.html

Objective of Porter's five forces analysis:

Porter's five forces analysis is a framework that attempts to analyze the level of competition within an
industry and business strategy development. It draws upon industrial organization (IO) economics to
derive five forces that determine the competitive intensity and therefore attractiveness of an Industry.
Porter's five forces include three forces from 'horizontal' competition: the threat of substitute products or
services, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical'
competition: the bargaining power of suppliers and the bargaining power of customers.

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The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a
business situation. This is useful, because it helps you understand both the strength of your current
competitive position, and the strength of a position you're considering moving into.

Source: https://www.mindtools.com/pages/article/newTMC_08.htm

This theory is based on the concept that there are five forces that determine the competitive intensity and
attractiveness of a market. Porters five forces help to identify where power lies in a business situation.
This is useful both in understanding the strength of an organisations current competitive position, and the
strength of a position that an organisation may look to move into.

Strategic analysts often use Porters five forces to understand whether new products or services are
potentially profitable. By understanding where power lies, the theory can also be used to identify areas of
strength, to improve weaknesses and to avoid mistakes.

Source:http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx?
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Porters Five Forces model has a role to play in helping management to evaluate and assess their current
market environment. It provides an excellent foundation for the further research and intelligence
gathering needed to formulate an organization's future strategy.

Source: http://www.free-management-ebooks.com/faqst/porter-07.htm
This model helps marketers and business managers to look at the balance of power in a market between
different types of organizations, and to analyze the attractiveness and potential profitability of an industry
sector. Its a strategic tool designed to give a global overview, rather than a detailed business analysis
technique. It helps review the strengths of a market position, based on five key forces.

Source: http://www.smartinsights.com/marketing-planning/marketing-models/porters-five-forces/