Financial Intelligence Meaning Skill sets Understanding the foundation

Financial Intelligence

Meaning Skill sets Understanding the foundation Understanding the art Understanding analysis Understanding the big picture

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.

Ask questions Look at financial reports with a questioning eye

Use the information - to improve cash flow - assess the company’s results

Benefits of financial literacy Increased ability to critically evaluate companies Better decision making- ROI / Accounts receivable Can I spend more money since my company is profitable Strength and balance throughout the organisation – HR / Mktg/ IT

Analysis of Financial Statements

Business Analysis Types of Business Analysis Credit Analysis Equity Analysis Business Environment and strategy Analysis Financial Analysis Prospective Analysis Valuation

Roadmap to Financial 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

Company Analysis Financial performance Revenues Profitability Asset Utilisation Cash flows Working capital Management Stock performance

Users of financial statements Contents of annual report

Tools for financial analysis - Ratios Percentage calculations – CAGR / YOY Indexation of numbers Comparison with relevant data

Road map for financial analysis of a company Business of the company Shareholding pattern

Profit & Loss Account - Installed capacity & utilisation - Sales - Profitability Analysis - Interest costs - Changes in accounting policies

Balance Sheet - Share capital - Reserves - Tangible net worth - Contingent liabilities - Debt composition - Movement in fixed assets, capital work in progress & investments

Cash flows - Operating cash flows - Investing cash flows

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. RPAT ROGNW ROCE ROE Earning per share Price Dividend per share NAV per share OPBDIT OPBDT OPBT

n n n Venus Music corner provides is in the business of providing audio CDs to customers. During March the accounts were maintained by a professional accountant 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. He prepared 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.

n n n n n 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 Balance Sheet as on April 30 Liabilities Assets Creditors 2510 Recording equipment 25500 Service revenue Supplies 2190 earned 12660 Debtors 1210 Capital 14300 Cash 570 29470