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Financial Analysis Techniques




Comparative Analysis


The item-by-item comparison of two or more comparable alternatives ,processes, products, qualifications,sets of data,systems,or the like. In accounting,for example,changes in a financial statement's items  over several acounting periods may be presented together to detect the emerging trends in the company's operations and results and.See also comparability analysis.



Vertical Analysis


Technique for identifying relationship between İtemse in the same financial statement by expressing all amounts as the percentage of the total amount taken as 100. In a balance sheet, for example, cash and other assets are shown as a percentage of the total assetse and, in an income statement each expense is shown as a percentage of the sale revenue.Financial statements using  this technique are called common size financial statements.


Ratio Analysis


A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis. Generally, financial ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the following categories:

  • Liquidity Ratios

  • Financial Leverage Ratio

  • Efficiency Ratios

  • Profitability Ratios         



Cash Flow Analysis


Cash flow analysis is the study of the cycle of your business' cash inflows and outflows, with the purpose of maintaining an adequate cash flow for your business, and to provide the basis for cash flow management.

Cash flow analysis involves examining the components of your business that affect cash flow, such as accounts receivable, inventory, accounts payable, and credit terms. By performing a cash flow analysis on these separate components, you'll be able to more easily identify cash flow problems and find ways to improve your cash flow.

A quick and easy way to perform a cash flow analysis is to compare the total unpaid purchases to the total sales due at the end of each month. If the total unpaid purchases are greater than the total sales due, you'll need to spend more cash than you receive in the next month, indicating a potential cash flow problem.


Rating Analyst


In order to reach an opinion and communicate the value and volatility of a covered security, analysts research public financial statements ,listen in on conference calls and talk to managers and the customers of a company, typically in an attempt to capture the findings for a research report. Ultimately, through all this investigation into the company's performance the analyst decides whether their stock is a "buy," sell" or hold." The question remains, however, is whether or not these recommendations are worth their salt? 



Productivity Analysis


The amount of output per unit of input (labor, equipment, and capital). There are many different ways of measuring productivity. For example, in a factory productivity might be measured based on the number of hours it takes to produce a good, while in the service sector productivity might be measured based on the revenue generated by an employee divided by his/her salary.



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