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Comparative Statement Analysis: Click To Edit Master Subtitle Style

This document discusses various financial analysis tools used to compare the past, present, and future financial conditions of firms. It summarizes comparative financial statement analysis, trend analysis, and inter-firm analysis which are used to measure profitability, indicate performance trends, and assess a firm's overall financial strength and solvency by comparing it to other firms. Specific metrics discussed for inter-firm comparison include market share, turnover ratio, margin ratio, return on capital employed, leverage, and return on equity. The DuPont analysis method of breaking down return on equity into return on assets, asset turnover, and equity multiplier is also introduced.

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Rahul Rathore
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© Attribution Non-Commercial (BY-NC)
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Download as PPTX, PDF, TXT or read online on Scribd
152 views

Comparative Statement Analysis: Click To Edit Master Subtitle Style

This document discusses various financial analysis tools used to compare the past, present, and future financial conditions of firms. It summarizes comparative financial statement analysis, trend analysis, and inter-firm analysis which are used to measure profitability, indicate performance trends, and assess a firm's overall financial strength and solvency by comparing it to other firms. Specific metrics discussed for inter-firm comparison include market share, turnover ratio, margin ratio, return on capital employed, leverage, and return on equity. The DuPont analysis method of breaking down return on equity into return on assets, asset turnover, and equity multiplier is also introduced.

Uploaded by

Rahul Rathore
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Comparative Statement Analysis

Rahul Rathore B.E CompSc PGDM- IB + Finance

Click to edit Master subtitle style

4/2/12

Financial Analysis

Assessment of the firms past, present and future financial conditions to find firms financial strengths and weaknesses Tools:

Done

Primary

Comparative Financial Statements Trend Analysis Inter Firm Analysis 4/2/12

Financial analysis serves the following purposes:

1. Measuring the profitability : Ascertaining whether adequate profits are being earned on the capital invested in the business or not.

2.

Indicating the trend of Achievements : The trend regarding various expenses, purchases, sales, gross profits and net profit etc. can be ascertained. Comparative position in relation to other 4/2/12 firms : Help the management to make a

3.

4. Assess overall financial strength :


Whether funds required for the purchase of new machines and equipments are provided from internal sources of the business or not if yes, how much?

5.

Assess solvency of the firm :The

different tools of an analysis tell us whether the firm has sufficient


funds

to meet its short term and long term liabilities or not. 4/2/12

Fundamental Of Comparing

In Balance sheet and P & L account Changes can be - increase -decrease which can be shown in two

ways: (1) Aggregate changes


4/2/12 (2) Proportional changes

Aggregate

changes can be indicated by special columns for aggregate amount or percentage or both of increase or dec. changes are shown by recording percentage calculated in relation to a common base. Such a financial statement are called as Common 4/2/12

Proportional

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Trend Analysis

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Trend Anlysis

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INTER FIRM ANALYSIS

The analysis of the financial performance of all firms in an industry and their comparision at a given point of time is reffered to the cross section analysis or the inter firm analysis.

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Common

size financial statements can be used to compare multiple companies at the same point in time. ascertain the relative financial standing ,the financial ratios are compared with its immediate competitors.
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To

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Market Share

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TURNOVER RATIO

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MARGIN RATIO

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Return on Capital Employed

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LEVERAGE

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ROE

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Conclusion.
So, the top three performer are as follows:

1) Market Share: (a) Jaiprakash(44%) (b)HindConst(11%) (c)ATV Project(9%) 2) ROCE : (a) ATV Project(14.6%) (b) Dorroliver (11.9%) (c) Jaiprakash(9.8%)
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Duo Pont System


Method

to breakdown ROE into:

ROA and Equity Multiplier

ROA

is further broken down as:

Profit Margin and Asset Turnover

Helps

to identify sources of strength and weakness in current performance to focus attention on value drivers 4/2/12

Helps

The DuPont System

ROE = Profit Margin Total Asset Turnover Equity Multiplier Net Income Sales Total Assets = Sales Total Assets Common Equity
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Duo Pont Analysis

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