Financial statement analysis test
Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck! Solvency describes a more long term ability to pay debts, whereas liquidity focuses on short term ones.
Guide to Financial Statement Analysis for Beginners
Many people who are just getting started with finance often feel it a headache to deal with financial statements. Clearly define the ideas for report analysis, know what to analyze, determine the metrics, and finally select a good reporting tool to achieve the final analysis results.
Different people do financial analysis for different purposes, but the common purpose is to obtain information that is useful for their economic decisions from financial statements. Therefore, there are three objects of financial statement analysis: financial position , operating results and cash flow. Based on this, the solvency analysis , profitability analysis and operational capability analysis that we need to do constitute the general framework for financial statement analysis.
For example, the competent department of the enterprise, the parent company, and the financial department focus on analyzing and checking the allocation of relevant resources of the enterprise, the compliance with financial and economic policies and financial systems, and the capital maintenance and capital appreciation.
Investors focus on analyzing the profitability, operational capacity and use of funds, and understanding investment returns and investment risks. Creditors focus on analyzing the solvency of enterprises, evaluating the degree of financial security or risk of enterprises, and so on. Considering the different requirements of internal management, the content of financial statement analysis is very extensive.
It should help report users to summarize and evaluate the financial condition and operating results of enterprises, and to provide a reliable basis for making economic forecasts and decisions. The specific data for each item of the report is only the surface, the structure various ratios or indicators is the skeleton, and the trend is the core.
The structure is more important than the value, and the trend is more important than the structure. Financial statements only make sense through comparative reading. Various accounting principles have natural limitations. Clarify the various checking relationships of the report, which is the basic skill. Make a horizontal comparison of the report structure, find out the major indicators difference with peer companies and analyze the reasons. Create your own ratios based on industry characteristics.
After the structural differences are listed, it is necessary to reason from the aspects of competitiveness, product segmentation, business model, scale, and geography. If there is no right reason, we may doubt the authenticity of the report.
The important content of trend analysis is assets , income and profits. Analyze whether the increase in assets comes from debt or equity profit or shareholder input. In addition, focus on changes in the proportion of each asset account, which often reflects changes in the model of the enterprise. Find out whether the increase in income is due to the expansion of the scope of consolidation or its own business expansion.
And focus on changes in gross margin and market share. In general, the gradual increase in market share under the premise of small fluctuations in gross profit margin is the most reliable and most sustainable situation.
The increase of profit should be logical reasoning of the growth of comprehensive assets and income, but the profit is at the end of the report after a number of additions and subtractions, and the objectivity is the weakest. It is necessary to understand the defects and loopholes of the accrual system in a dialectical manner. You should consider the increase in assets and income to analyze the increase in profits. But after a series of data operations, the profit is the least objective.
You ought to understand in depth the flaws and vulnerabilities of the accrual system and then analyze profits in a dialectical way. Therefore, the key to the report is the time that is seen. And time has a great impact on the report. The most important checking relationship is that the debt plus equity equals the asset.
In accounting, what I have at present is called assets, and the borrowed money is the debt, and my own money is called equity. The income statement or profit sheet mainly tells us the profit and loss of the company over a period of time.
The key point of the profit sheet is to see how long this period is, usually one month, one quarter or one year. In the income statement, the most important checking relationship is that income minus cost equals profit. The cash flow sheet mainly tells us how much cash the company has received in a period of time, how much cash it has paid, and how much cash is left in the bank. The key to this report is also to see how long this period is, which is the same as the profit sheet.
The most important checking relationship of the cash flow sheet is that the inflow of cash minus the outflow of cash is equal to the remaining cash. This relationship is also very simple, so I will not explain much. If the amount of data is not large enough to use the database, you can use excel to do financial statements.
Of course, if you write VB language, excel can also be connected to the database. However, if the financial analysis involves the database, you should choose professional software. Below I use the zero-coding tool FineReport to demonstrate the various financial report styles. FineReport adopts a drag-and-drop operation, an excel-like interface, which is easy for financial newbies to get started with.
For example, we can use FineReport to make a dashboard to form a financial management cockpit. The operation is to drag and drop data fields to generate analysis charts, which are combined into one theme analysis. Financial Management Dashboard. Standard Benefits Review. Dupont Analysis. Daily Shipping Expenses. Product Cost Analysis. Sign in. Guide to Financial Statement Analysis for Beginners. Lewis Chou Follow.
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4. The quick ratio EXCLUDES which of the following? Accounts Receivable. wiacek.com.au the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and.
Many people who are just getting started with finance often feel it a headache to deal with financial statements. Clearly define the ideas for report analysis, know what to analyze, determine the metrics, and finally select a good reporting tool to achieve the final analysis results. Different people do financial analysis for different purposes, but the common purpose is to obtain information that is useful for their economic decisions from financial statements. Therefore, there are three objects of financial statement analysis: financial position , operating results and cash flow. Based on this, the solvency analysis , profitability analysis and operational capability analysis that we need to do constitute the general framework for financial statement analysis.
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