1 INTRODUCTION: FINANCIAL ANALYSIS TOOLS

2 SOCIETY BUSINESSGOVERNMENT CONSUMERS ISSUES

3 BUSINESS ACTIVITIES FORMS OF BUSINESS Sole Proprietorship Partnership Company –Private Limited Company –Public Limited Company NGOs

4 Why some companies are ‘good’ and some are ‘bad’? “Forbes100” from 1917 to 1987: 39 members of the 1917 were alive in 1987; 18 in 1987 F100; these 18 F100 “survivors” underperformed the market by 20%; just 2 (2%), GE & Kodak, outperformed the market 1917 to Source: Dick Foster & Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market

5 DEFINITION OF ACCOUNTING “Accounting is the process of –identifying, –measuring and –Communicating economic information to permit informed judgements and decisions by users of the information.”

6 Definition of A/c (contd…) “Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, and about economic activities, that is intended to be useful in making economic decisions.”

7 FINANCIAL STATEMENTS Statement of Financial Position (balance sheet) Assets = Shareholders’ Capital + Outside Liabilities. Statement of Comprehensive Income (profit & loss) Statement of Cash Flows Statement of Changes in Equity

8 OBJECTIVE OF FS USERS’ INFORMATION NEEDS 1) Liquidity 2) Profitability 3) Solvency

9 USERS OF FIN. ST. PRESENT & POTENTIAL SHAREHOLDERS / TRUSTEES / MEMBERS EMPLOYEES LENDERS SUPPLIERS & OTHER CREDITORS CUSTOMERS GOVERNMENT & ITS AGENCIES PUBLIC

Relationships elect report elect review account Sharehol ders Auditors Directors

11 TYPES OF ACCOUNTING Financial accounting Income-tax accounting Cost accounting Management Accounting (Management Control Systems) Management Reporting

Annual Report Discussion 12

13 Thank you The two most beautiful words in the English language are 'cheque enclosed‘. (Dorothy Parker)