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Financial Analysis > Financial position analysis > Flashcards

Financial position analysis Flashcards

1
Q

What does the financial position of a company show?

A

It shows the relationship between its assets, liabilities and equity.

The main source is the balance sheet

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2
Q

What are assets?

A

Assets are resources controlled by the company as a result of past events, from which future economic benefits are expected to flow.

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3
Q

What are liabilities?

A

Liabilities are present obligations as a result of past events.

Their settlement is expected to result in an outflow of resources.

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4
Q

What is equity?

A

Equity represents the owner’s interest in the company’s assets after dudcting its liabilities.

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5
Q

What is the balance sheet?

A

The balance sheet is a formalized representation of the relationship between the assets, liabilities and equity of a company.

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6
Q

What are non-current assets?

A

Non current assets are assets which have a useful life of more than a year.

It includes land and buildings, equipment etc.

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7
Q

What are current assets?

A

Current assets are assets which will be consumed/converted into cash in less than a year.

Meaning they have a lifespan of less than a year

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8
Q

How are liabilities grouped?

A
  • Long-term liabilities ( > 1 year)
  • Current liabilities ( < 1 year)
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9
Q

What does the horizontal analysis focus on?

A

Horizontal analysis determines the absolute/relative changes of balance sheet items.

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10
Q

What does vertical analysis focus on?

A

Vertical analysis evaluates the changes in the structure of assets, liabilities and equity.

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11
Q

What is liquidity analysis?

A

It measures the ability of a company to remain in business. (verry important)

Precisely, it measures the ability of assets to pay the company’s debts/liabilities.

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12
Q

What is current liquidity?

A

It shows the capacity of current assets to pay current liabilities.

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13
Q

What is working capital?

A

It shows the current assets that are permanently availably to the company.

Meaning assets that remain after paying debt

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14
Q

What is solvency analysis?

A

It reflects the ability to stay in business over the long-term.

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15
Q

What is activity analysis?

A

It shows how well management uses the company’s resources.

It is a strong indicator of the quality of management

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16
Q

What are some examples of current assets?

A
  • Cash
  • Marketable securities (short term investments)
  • Accounts receivable
  • Inventory
  • Prepaid expenses
17
Q

What are some examples of current liabilities?

A
  • Payables
  • Prepayments
  • Accruals
  • Short-term debts
18
Q

What does financial autonomy ratio show?

A

It show the extent to which the business financed its activity from its own sources.

Total sources reflect own and raised sources

19
Q

What represents the debt ratio?

A

The debt ratio reflects the extent to which the entity funds its operations from debt. (loans)

20
Q

What represents the stability ratio?

A

It shows the investment capacity of the business.

21
Q

What does the long-term autonomy ratio show?

A

Shows the financing capacity of the firm using long-term resources.

22
Q

What does financial debts ratio show?

A

It shows the indebtedness of the business in financial and banking sources.

23
Q

What does long-term financial debts ratio show?

A

It shows the indebtedness of the entity in financial and banking sources on the long term.

24
Q

What does debt to equity ratio show?

A

It shows how economic resources of the company are purchased from foreign capital.

25
Q

What is the quick ratio/acid test?

A

It is a test to see how well current assets can pay current liabilities (excluding inventories - more strict)

26
Q

What does the general solvency ratio show?

GSR

A

It shows the capacity of the company to reimburse at maturity the total debts.

27
Q

What does general solvendy on a long term ratio show?

GSRL

A

It shows the businesse’s ability to reimburse the long-term debts from the assets of the entity which remain after payment of current liabilities.

28
Q

What represents days sales outstanding?

DSO

A

It represents the average period of collecting receivables

29
Q

What represents days payables outstanding?

DPO

A

It represents the average period of paying debts

30
Q

What does the accounts receivable turnover ratio show?

A

It shows how quickly a company is collecting its receivables.

31
Q

What does accounts payable turnover ratio show?

A

It shows the speed with witch a company pays its suppliers

Financial Analysis (6 decks)

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