In this chapter, students will be able to understand: Use ratios to analyze a firm's health and then recommend reasonable alternative courses of action to improve the health of the firm; analyze a firm’s return on investment (i.e., “earning power”) and return on equity using a DuPont approach; understand the limitations of financial ratio analysis;...
“Erich Helfert’s book is a bona fide treasury for executives, managers, and entrepreneurs who need to understand financial management. I have used and recommended this great work in both corporate and university programs for more than ten years. Erich Helfert possesses unique abilities to make clear the arcane that frequently enshrouds topics of financial management.” Allen B. Barnes Past Provost IBM Advanced Business Institute (formerly Director of Executive Education, UCLA) “Erich Helfert’s book is a candidate for every consultant-to-management’s bookshelf.
Tools that help us determine the financial health of a company.
We can compare a company’s financial ratios with its ratios in previous years (trend analysis).
We can compare a company’s financial ratios with those of its industry. Do we have enough liquid assets to meet approaching obligations ?If the average current ratio for the
industry is 2.4, is this good or not?
Chapter 13 - Working with financial statements. In this chapter, you will know how to standardise financial statements for comparison purposes, know how to compute and interpret important financial ratios, know the determinants of a firm’s profitability and growth, understand the problems and pitfalls in financial statement analysis.
In this chapter you will: Understand important financial performance measures and their users, by life cycle stage; describe how financial ratios are used to monitor a venture’s performance; identify specific cash burn rate measures and liquidity ratios and explain how they are calculated and used by an entrepreneur;...
Chapter 15 focuses on financial statement analysis, which is used to assess the financial health of a company. It includes examining trends in key financial data, comparing financial data across companies, and analyzing financial ratios.
After Studying Chapter 6, you should be able to: Understand the purpose of basic financial statements and their contents, understand what is meant by “convergence” in accounting standards, explain why financial statement analysis is important to the firm and to outside suppliers of capital;...
Chapter 6 - Financial statement analysis. To make rational decisions in keeping with the objectives of the firm, the financial manager must have analytical tools. Some of the more useful tools of financial analysis and planning are the subjects of this and the next chapter.
This book describes the theory and practice of corporate finance. We hardly need to explain why financial managers should master the practical aspects of their job, but we should spell out why down-to-earth, redblooded managers need to bother with theory. Managers learn from experience how to cope with routine problems. But the best managers are also able to respond to change. To do this you need more than time-honored rules of thumb; you must understand why companies and financial markets behave the way they do. In other words, you need a theory of finance.
Managers are naturally inclined to act in their own best interests. But the following factors affect managerial behavior: Managerial compensation plans, Direct intervention by shareholders, The threat of firing, The threat of takeover. Shareholders versus Creditors
Shareholders (through managers) could
take actions to maximize stock price
that are detrimental to creditors.
In the long run, such actions will raise
the cost of debt and ultimately lower
In all fields of inquiry, whether financial, scientific, or any other, there is danger of not seeing the
woods for the trees. Nowhere is this danger greater than in the analysis of assets and liabilities as
well as in cash management, in a leveraged financial environment with derivative instruments that
change from assets to liabilities, and vice versa, depending on their fair market value.
For many companies, the decision would have been
an easy “yes.” However, Ben & Jerry’s Homemade
Inc. has always taken pride in doing things
differently. Its profits had been declining, but in 1995
the company was offered an opportunity to sell its
premium ice cream in the lucrative Japanese market.
However, Ben & Jerry’s turned down the business
because the Japanese firm that would have distributed
their product had failed to develop a reputation for
promoting social causes! Robert Holland Jr.
Real-world accounting basics that can be applied today, written by a proven accounting author
How do you make sense of the accounting report or balance sheet you’ve just been handed? How do these reports help you to understand the company’s performance? How do you use the numbers you have been given to make good business decisions in the short- and long-term?
MBA Fundamentals in Accounting and Finance offers real-world accounting and finance basics that can be applied today. In the business world, we are frequently called on to review and analyze financial data.
An emphasis on intuition—the authors separate and explain the principles at work on a common sense, intuitive level before launching into any specifics.
2) A unified valuation approach—net present value (NPV) is treated as the basic concept underlying corporate finance.
3) A managerial focus—the authors emphasize the role of the financial manager as decision maker, and they stress the need for managerial input and judgment.
This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent right restrictions require it
The 1980s and 1990s have been critical periods for Thailand’s development. After an initial period of instability in the early 1980s, Thailand’s economy expanded at an average pace of 9 percent p.a. during 1987–96, while the number of households below the poverty line dropped from 32.6 percent in 1988 to 16.3 percent in 1996.
During this period, Thailand’s economy also underwent deep structural changes, including the liberalization of its financial sector and the integration of its economy with global financial and product markets.
a. A proprietorship, or sole proprietorship, is a business owned by one individual. A partnership exists when two or more persons associate to conduct a business. In contrast, a corporation is a legal entity created by a state. The corporation is separate and distinct from its owners and managers. b. In a limited partnership, limited partners’ liabilities, investment returns and control are limited, while general partners have unlimited liability and control.
Financial Statement Analysis Tools
Describe what financial ratios are and who uses them. Define the five major categories of ratios (liquidity, efficiency, leverage, coverage, and profitability). Calculate the common ratios for any firm by using income statement and balance sheet
Buy low, sell high! That's the shortcut to a fortune, right? Wrong! It is just one of many loss-causing cliches that the crowd chants as they lose money year after year. There are many other do's on Wall Street that are really don't such as the neccessity of reading the financial pages and watching the evening TV business report so your are in touch with important developments in the economy and its leading inclustries