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8/6/2019 AFS 1
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Financial
Intelligence
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Meaning
Skill sets
Understanding the foundation
Understanding the art
Understanding analysis
Understanding the big picture
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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.
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U se the information
- to improve cash flow
- assess the company¶s results
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Benefits of financial literacy
Increased ability to critically evaluate companies
Better decision making- ROI
/ Accounts receivableCan I spend more money since my company is
profitable
Strength and balance throughout the organisation ±
HR / Mktg/ IT
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Analy si s of Financial
Statement s
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Business AnalysisTypes of Business Analysis
Credit Analysis
Equity Analysis
Business Environment and strategy Analysis
Financial Analysis
Prospective Analysis
Valuation
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Roadmap t
oFinancial Analy
sis
Business 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
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Company Analysis
Financial performance
Revenues
Profitability
Asset Utilisation
Cash flows
Working capital Management
Stock performance
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Users of financial statements
Contents of annual report
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Tools for financial analysis
- Ratios
- Percentage calculations ± CAGR / YOY
- Indexation of numbers
- Comparison with relevant data
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Road map for financial analysis of a company
Business of the company
Shareholding pattern
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Profit & Loss Account
- Installed capacity & utilisation
- Sales- Profitability Analysis
- Interest costs
- Changes in accounting policies
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Balance Sheet
- Share capital
- Reserves
- Tangible net worth- Contingent liabilities
- Debt composition
-Movement in fixed assets, capital work inprogress & investments
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Cash flows
- Operating cash flows
- Investing cash flows
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Venus Music corner provides is in the business of
providing audio CDs to customers. During March
the accounts were maintained by a professionalaccountant 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. Heprepared 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.
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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 Supplies2190
earned 12660 Debtors 1210
Capital 14300 Cash 570
29470 29470
