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    Rishi Accounts

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    Rishi Jain

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    © All Rights Reserved
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    Rishi Accounts

    Uploaded by

    Rishi Jain
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    RISHI ACCOUNTS.pptx

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    Download as pptx, pdf, or txt
    10 views12 pages

    Rishi Accounts

    Uploaded by

    Rishi Jain

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 12

    RISHIKESH K JAIN

    MB-21052

    ANALYSIS OF FININCIAL STATEMENT


    Financial Statements
     Financial statements provide information about the financial activities and
    position of a firm.
     Important financial statements are:
    –Balance sheet
    –Profit & Loss statement
    –Cash flow statement
    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


    Assets
     Assets are economic resources or properties owned by the firm.
    •There are two types of assets:
    –Fixed assets
    –Current assets
    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
    –Tradable (marketable) securities
    –Debtors (account receivables)
    –Stock of raw material
    –Work-in-process
    –Finished goods
    Fixed Assets
     Fixed assets are long-term assets.
    –Tangible fixed assets are physical assets like land, machinery, building,
    equipment.
    –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.
    Liabilities
    Current liabilities are payable within a year in the normal course of
    business.
    •They include:
    –Accounts payable (creditors)
    –Outstanding expenses
    –Advances from customers
    –Provision for tax
    –Provision for dividend
    Long-term Liabilities
    •Long-term liabilities are the obligations or debts payable in a
    period of time greater than the accounting period.
    •They include - Debentures, bonds, and secured long-term
    loans from financial institutions.
    Balance Sheet Relationship
    •Total assets (TA) equal net fixed assets (NFA) plus current assets (CA):
    TA = NFA + CA
    •Net current assets (NCA) is the difference between current assets (CA) and current liabilities (CL):

    NCA = CA – CL 11

    •Net assets (NA) equal net fixed assets (NFA) plus net current assets (NCA):
    NA = NFA + NCA
    •Capital employed (CE) is the sum of net worth or equity (E) and borrowing/debt (D) and it is
    equivalent of net assets:

    CE = Net Worth + Borrowing = E + D


    Capital Employed = Net Assets
    Profit & Loss Statement
    Nature of Revenues
    •Revenue is the amount received or receivable within the accounting period from the sale of the
    firm’s goods or services.
    •Operating revenue is the one that arises from main operations of the firm, and the revenue arising
    from other activities is called non-operating revenue.

    Nature of Expenses
    •Expense is the amount paid or payable within the accounting period for generating revenue.

    Concepts of Profit
    •Gross profit = sales – cost of goods sold (CGS)
    –CGS = raw material consumed + manufacturing expenses of goods that have been sold
    Financial Analysis
    Financial analysis is the process of identifying the financial
    strengths and weaknesses of the firm by property establishing
    relationships between the item of the balance sheet and the profit
    and loss account.
    THANKS

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