财务分析报告代写 Steps to a Basic Company Financial Analysis

Steps to a Basic Company Financial Analysis

财务分析报告代写 Calculate financial ratios in each of the following categories, for each year.  You may use the formulas found in your textbook

These are basic steps you may use when evaluating company cases in my graduate and undergraduate courses. Before you start, you must understand a couple of things.

This is not meant to be an exhaustive list; there are other steps that can be followed to get deeper into the meaning of the numbers.

You cannot analyse the numbers in a vacuum .  The numbers only provide indicators to trigger further questions in your mind.

In order to do a thorough job, you must understand something about the company’s business and strategies, and its industry.  Financial indicators vary from industry to industry; the ratios can only be interpreted when compared and contrasted with other companies  in that industry.  For example, financial  indicators  are  (and  should  be)  different  among  financial  institutions,  manufacturing companies, companies that provide services, and technology and computer information and services companies.

Financial analysis is something of an art.  Experienced managers, investors and analysts develop a data bank of information over time, and after doing many such analyses, that they bring to bear every time they review a company.

Step 1.    财务分析报告代写

Acquire the company’s financial statements for several years.  These may be found in your assigned case study; in a recent annual report.  As a minimum, get the following statements, for at least 3 to 5 years.

•          Balance sheets


•          Income statements


•          Shareholdersequitystatements


•          Cash flowstatements

Step 2.

Quickly scan all of the statements to look for large movements in specific items from one ear to the next.  For example, did revenues have a big jump, or a big fall, from one particular year to the next?  Did total or fixed assets grow or fall?  If you find anything that looks very suspicious, research the  information  you  have  about  the  company  to  find  out  why .  For  example,  did  the  company purchase a new division, or sell off part of its operations, that year?

Step 3.

Review the  notes accompanying the financial statements for additional  information that may be significant to your analysis.

Step  4.  财务分析报告代写

Examine  the  balance  sheet.   Look  for  large  changes  in  the  overall  components  of  the company's assets, liabilities or equity.  For example, have fixed assets grown rapidly in one or two years, due to acquisitions or new facilities?  Has the proportion of debt grown rapidly, to reflect a new financing strategy?  If you find anything that looks very suspicious, research the information you have about the company to find out why.

Step 5.

Examine the income statement.  Look for trends over time.  Calculate and graph the growth of the following entries over the past several years.

•          Revenues(sales)


•          Netincome(profit, earnings)

Are the  revenues  and  profits  growing  over  time?  Are  they  moving  in  a  smooth  and  consistent fashion,  or  erratically  up  and  down?  Investors  value  predictability,  and  prefer  more  consistent movements to large swings.  财务分析报告代写

For each of the key expense components on the income statement, calculate it as a percentage of sales for each year.  For example,calculate the percent of cost of goods sold over sales, general and administrative expenses over sales, and research and development over sales.  Look for favourable or unfavourable trends.  For example, rising G&A expenses as a percent of sales could mean lavish spending.

Also,  determine  whether  the  spending  trends  support  the  company’s  strategies.  For example,  increased  emphasis  on  new  products  and  innovation  will  probably  be  reflected  by  an increased proportion of spending on research and development.

Look for non-recurring or non-operating items.  These are "unusual" expenses not directly related to ongoing operations.  However, some companies have such items on almost an annual basis.  How do these reflect on the earnings quality?

If  you  find  anything  that  looks  very  suspicious,  research  the  information  you  have  about  the company to find out why.

Step  6.  财务分析报告代写

Examine  the  shareholder's  equity  statement.   Has  the  company  issued  new  shares,  or bought some back?  Has the retained earnings account been growing or shrinking?  Why?  Are there signals about the company's long-term strategy here?

If  you  find  anything  that  looks  very  suspicious,  research  the  information  you  have  about  the company to find out why.

Step  7.

Examine the  cash  flow  statement,  which  gives  information  about the  cash  inflows  and outflows from operations, financing, and investing.

While the income statement provides information about both cash and non-cash items, the cash flow statement attempts to reconstruct that information to make it clear how cash is obtained and used by the business, since that is what investors and creditors really care about.

If  you  find  anything  that  looks  very  suspicious,  research  the  information  you  have  about  the company to find out why.

Step 8.

Calculate financial ratios in each of the following categories, for each year.  You may use the formulas found in your textbook, or other  materials you  have from your finance  and accounting courses.  A summary of some useful ratios appears at the end of this document.

•          Liquidityratios


•          Leverage(ordebt) ratios


•          Profitabilityratios


•          Efficiencyratios


•  Value ratios

Graph the ratios over time, to find the trends in the ratios from year to year.  Are they going up or down?  Is that favourable or unfavourable?  This should trigger further questions in your mind, and help you to look for the underlying reasons.

Step 9.  财务分析报告代写

Obtain data for the company’s key competitors, and data about the industry.

For competitor companies, you can get the data and calculate the ratios in the same way you did for the company being studied.

Compare the  ratios for the  competitors  and the  industry to the  company  being  studied.  Is the company favourable in comparison?  Do you  have enough information to determine why or why not?  If you don’t, you may need to do further research.

Step  10.

Review the  market  data  you  have  about  the  company’s  stock  price,  and  the  price  to earnings (P/E) ratio.

Try to research and understand the movements in the stock price and P/E over time.  Determine in your own mind whether the stock market is reacting favourably to the company’s results and its strategies for doing business in the future.

Review the evaluations of stock market analysts.

Step 11.    财务分析报告代写

Review the dividend pay-out.  Graph the pay out over several years.  Determine whether the  company’s  dividend  policies  are supporting their  strategies.  For  example,  if the  company  is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends?  Based on your research into the industry, are you convinced that the company has sufficient opportunities for profitable reinvestment and growth, or should they be distributing  more to the  owners  in the form  of  dividends?   Viewed  another way,  can  you  learn anything about their long-term strategies from the way they pay dividends?

Step 12.

Review all of the data that you have generated.  You will probably find that there is a mix of positive and negative results.  Answer the following question:

“Based  on  everything  I  know  about  this  company  and  its  strategies,  the  industry  and  the competitors, and the external factors that will influence the company in the future, do I think this company is worth investing in for the long term?”

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