1. FINANCIAL STATEMENT ANALYSIS

2. Financial Analysis Types of Financial Analysis According to Purpose
According to Scope
According to People
Component of Financial Analysis
Technical Analysis
Fundamental Analysis
Economy Analysis
Industry Analysis
Accounting Analysis (Financial Statement Analysis )
Techniques of Financial Analysis
Comparative Financial Statements Analysis
Ratio Analysis

3. The tools of financial statement analysis are financial statements:
Balance Sheet
Income Statement
Cash Flow Statement

4. Techniques Of Financial Statement Analysis
FINANCIAL STATEMENTS
Techniques Of Financial Statement Analysis
Comparative financial statements analysis
Vertical analysis (Common size analysis) (Dikey-Yüzde Yöntemi)
Horizontal analysis (Comparative financial statement analysis) (Yatay-Karşılaştırmalı Tablo Yöntemi)
Trend analysis (Trend Analizi Yöntemi)
Ratio Analysis (Rasyo Analizi)

5. Ratio Analysis FINANCIAL STATEMENTS RATIO ANALYSIS
In ratio analysis, a simple arithmetical relationship of one number to another is calculated.
Ratio categories which are produced for financial analysis purpose are as follows:
Liquidity,
Activity,
Solvency and Financial Structure,
Profitability .

6. Activity Ratios (Turnover Ratios)
Ratio Groups
Ratio
Liquidity Ratios
(Indicates ability of a firm to meet short-term obligations)
Activity Ratios (Turnover Ratios)
(Indicates efficiency and effectiveness of operations and asset management)
Current Ratio (CR)= Current Assets Current Liabilities
Quick Ratio (Acid-Test or Liquidity Ratio)= Current Assets−Inventory Current Liabilities
Dependence of Inventory= Current Liabilities− (Current Assets −Inventory) Current Liabilities
Cash Ratio= Cash and Cash Equivalents Current Liabilities
Accounts Receivable (A/R) Turnover= Annual Credit Sales or Net Sales Avarage of A/R
Days To Collect A/R= A/R Turnover
Inventory Turnover= Cost of Goods Sold Avarage of Finished Goods
Days To Sell Inventory= 360 Invetory Turnover
Accounts Payable (A/P) Turnover= Net Sales Avarage of A/P
Days To Pay A/P= 360 A/P Turnover
Current Assets Turnover= Net Sales Avarage of Current Assets
Non-Current Assets Turnover= Net Sales Avarage of Non−Current Assets
Working Capital Turnover= Net Sales Avarage of Working Capital

7. (Indicates ability to retain earnings (growth) after covering costs)
Ratio Groups
Ratio
Financial Structure Analysis (Solvency Ratios)
(Indicates the ability of a firm to meet long-term obligations and capital structure decisions)
Profitability Ratios
(Indicates ability to retain earnings (growth) after covering costs)
Financial Leverage Ratio= Total Liabilities Total Assets (Total Liabilities and Equity)
Debt to Equity Ratio= Total Liabilities (Current and Non−Current Liabilities) Total Equity
Non−Current Assets Total Assets
Current Assets Total Assets
Current Liabilities Total Assets/Liabilities
Equity Total Assets/Liabilities
Non−Current Liabilities Total Assets/Liabilities
Non−Current Assets Permanent Capital (Capital Employed)
Return on Assets (ROA)= Net Profit (Earnings After Interest and Tax) Total Assets
ROA= Net Profit Margin x Assets Turnover
ROA= Net Profit Net Sales x Net Sales Total Assets
Return on Equity (ROE)= Net Profit (Earnings After Interest and Tax) Total Equity
ROE= Net Profit Margin x Equity Turnover
ROE= Net Profit Net Sales x Net Sales Total Equity
Return on Total Capital (ROC)= Earnings Before Interest and Tax (Net Profit+Interest Expense) Total Liabilities and Equity

8. (Indicates ability to retain earnings (growth) after covering costs)
Ratio Groups
Ratio
Profitability Ratios
(Indicates ability to retain earnings (growth) after covering costs)
Return on Assets (ROA)= Net Profit (Earnings After Interest and Tax) Total Assets
ROA= Net Profit Margin x Assets Turnover
ROA= Net Profit Net Sales x Net Sales Total Assets
Return on Equity (ROE)= Net Profit (Earnings After Interest and Tax) Total Equity
ROE= Net Profit Margin x Equity Turnover
ROE= Net Profit Net Sales x Net Sales Total Equity
Return on Total Capital (ROC)= Earnings Before Interest and Tax (Net Profit+Interest Expense) Total Equity
ROA provides a measure of return generated by the entity on the investment in total assets. ROA is a function of a firm’s profitability (net profit margin) and efficiency (turnover).
ROE measures return of capital provided from owners.
ROC (ROCE) ratio measures the overall performance of the business. To mention about the profitability of equity, the ROE ratio must be higher than ROCE ratio. Otherwise, the interest costs are high and firm can not take advantage of financial leverage. Therefore the financial leverage effects the return on equity.

9. (Common-size Profitability Ratios)
FINANCIAL STATEMENTS
RATIO ANALYSIS
Ratio Groups
Ratio
Profitability Ratios
(Common-size Profitability Ratios)
Gross Profit Margin= Gross Profit Net Sales
Operating Profit Margin= Operating Profit Net Sales
Pretax Margin= Earnings Before Tax (Profit of Current Period) Net Sale𝑠
Net Profit Margin= Net Profit Net Sales

10. FINANCIAL STATEMENT ANALYSIS
THE ANALYSIS OF ARCELIK CO.

11. THE ANALYSIS OF ARCELIK CO
For example; the percentage of current assets will be calculated as follows:
BALANCE SHEET OF ARÇELİK CO.
2010 %
2011
ASSETS
CURRENT ASSETS
0,65
0,66
Cash and Cash Equivalents
0,18
0,13
Financial Assets
1.185
0,00
2.932
Trade Receivables
0,32
0,35
Inventories
0,17
Other Current Assets
0,02
NON-CURRENT ASSETS
0,34
0,09
0,06
Investments Accounted for Using the Equity Method
Non-current Assets Held for Sale
5.480
6.441
Tangible Assets
0,16
Intangible Assets
Goodwill
7.190
Deferred Tax Assets
39.244
0,01
63.387
TOTAL ASSETS
1,00

12. For 2011 the assets structure of the Arçelik is as follows:
BALANCE SHEET OF ARÇELİK CO.
2010 %
2011
ASSETS
CURRENT ASSETS
0,65
0,66
Cash and Cash Equivalents
0,18
0,13
Financial Assets
1.185
0,00
2.932
Trade Receivables
0,32
0,35
Inventories
0,17
Other Current Assets
0,02
NON-CURRENT ASSETS
0,34
0,09
0,06
Investments Accounted for Using the Equity Method
Non-current Assets Held for Sale
5.480
6.441
Tangible Assets
0,16
Intangible Assets
Goodwill
7.190
Deferred Tax Assets
39.244
0,01
63.387
TOTAL ASSETS
1,00
Interpretation:
Considering 2010, current assets are 65% , non-current assets are %35 of Total Assets. Trade Receivables are 32%, inventories are %13 of total assets. Tangible assets accounts 17% of total assets.
For 2011 the assets structure of the Arçelik is as follows:
The current assets 66% non-current assets are %34 of Total Assets. Trade Receivables are 35%, inventories are %17 of total assets. Tangible assets accounts 16% of total assets.

13. THE ANALYSIS OF ARCELIK CO
BALANCE SHEET OF ARÇELİK CO.
2010 %
2011
LIABILITIES
Current Liabilities
0,32
0,38
Financial Liabilities
0,11
0,18
Other Financial Liabilities
0,02
Trade Payables
0,13
0,14
Provisions for Tax
18.970
0,00
23.250
Provisions
0,03
Other Liabilities
Non-Current Liabilities
0,21
Equity
0,47
0,40
TOTAL LIABILITIES AND EQUITY
1,00
Interpretation:
Considering 2010, current Liabilities are 32% of Total Liabilities and Equity. Total Liabilities are % 53 of Total Assets. Capital employed accounts 68% of total liabilities and equity. Equity accounts 47% of Total Liabilities and Equity. It can be said that Arçelik is traditionally funded.
For 2011, current Liabilities are 38% of Total Liabilities and Equity. Total Liabilities are % 59 of Total Assets. Capital employed accounts 61% of total liabilities and equity. Equity accounts 40% of Total Liabilities and Equity.

14. CE= Non-Current Liabilities + Equity.
THE ANALYSIS OF ARCELIK CO
In order to analysis the financial position of the company, the assets and liabilities must be analyzed together.
Working Capital = Current assets - Current Liabilities.
Capital employed (permanent capital) is presented non- current liabilities and equity. Alternatively, capital employed can be calculated as the difference between total assets and current liabilities.
CE= Non-Current Liabilities + Equity.
CE= Total Assets- Current Liabilities

15. BALANCE SHEET OF ARÇELİK CO.
2010 %
2011
ASSETS
Current Assets 65 66
Non-current Assets 35 34
TOTAL ASSETS
100
BALANCE SHEET OF ARÇELİK CO.
2010 %
2011
LIABILITIES
Current Liabilities 32 38
Non-current Liabilities 21
EQUITY 47 40
TOTAL LIABILITIES AND EQUITY
100
Interpretation:
Considering 2010, 32% of total assets is funded by current liabilities. Working Capital of Arçelik Co. accounts 33% of total assets. Non-current assets is funded by capital employed (permanent capital). In other words, working capital is funded by capital employed.
For 2011, 38% of total assets is funded by current liabilities. Working Capital of Arçelik Co. accounts 28% of total assets. Non-current assets is funded by capital employed (permanent capital). %28 of current assets is funded by capital employed. In other words, working capital is funded by capital employed.

16. INCOME STATEMENT OF ARCELİK CO.
2010 %
2011
Sales
100
Cost of Goods Sold
( )
(70)
( )
Gross Profit 30
Operating Expenses
Other Operating Income 2
60.194 1
Other Operating Expense
(58.341)
(1)
(72.857)
Operating Profit 9 8
Share of the Profit/Loss of Associates Accounted for Using the Equity Method
11.907
28.378
Financial Income 4 5
Financial Expense
( )
(4)
( )
(6)
Profit Before Tax 7
Tax Expense of Current Period
(83.492)
(71.996)
Deferred Tax Expense
(23.899)
(0)
(2.326)
Net Profit 6
Other Comprehensive Income
Profit /Loss of The Period
Revaluation Funds of Financial Assets 3
( )
(2)
Revaluation Funds of Tangible Assets
363
423
Effects of Changes in Foreign Exchange Rates
(16.611)
Comprehensive Income After Tax
(35.626)
Total Comprehensive Income 11
Interpretation:
It demonstrates that in 2010, Cost of Goods Sold is 70% of Sales. Gross profit is 30% of Sales. The operating profit margin is 9%.
Considering 2011, the cost of goods sold accounts 70% of sales. Cost of goods sold and operating expenses accounts 78% of sales.

17. THE ANALYSIS OF ARCELIK CO
Horizontal Analysis (Comparative Statement) : It refers to comparison of financial data of a company horizontally over a number of columns for several years. Horizontal analysis to compare financial statements from different periods.

18. THE ANALYSIS OF ARCELIK CO
Horizontal Analysis For example; the percentage of current assets will be calculated as follows:
BALANCE SHEET OF ARCELIK CO.
Increase/ Decrease %
ASSETS
Current Assets 27
Cash and Cash Equivalents
-11
Financial Assets
1.185
2.932
1.747
14,7
Trade Receivables 37
Inventories 55
Other Current Assets
28.033 24
Non-Current Assets 23
TOTAL ASSETS 26

19. BALANCE SHEET OF ARCELIK CO.
2010
2011
Increase/ Decrease %
ASSETS
Current Assets 27
Cash and Cash Equivalents
-11
Financial Assets
1.185
2.932
1.747
14,7
Trade Receivables 37
Inventories 55
Other Current Assets
28.033 24
Non-Current Assets 23
-24
Investments Accounted for Using the Equity Method
23.976 18
Non-current Assets Held for Sale
5.480
6.441
961
Tangible Assets 16
Intangible Assets 70
Goodwill
7.190
2628
Deferred Tax Assets
39.244
63.387
24.143 62
TOTAL ASSETS 26
Interpretation:
Current assets demonstrate a %27 increase and the increase in trade receivables accounts 37% increase. Comparing with previous period (2010), the increase in inventories accounts 55%.
Non-current assets demonstrate a %23 increase and tangible assets demonstrate a %18 increase, comparing with previous period.

20. Horizontal Analysis of Balance Sheet Interpretation:
BALANCE SHEET OF ARCELIK CO.
2010
2011
Increase/ Decrease %
LIABILITIES
Current Liabilities 51
Financial Liabilities 94
Other Financial Liabilities
54.117 42
Trade Payables 29
Provisions for Tax
18.970
23.250
4.280 23
Provisions
27.230 13
Other Liabilities
32.712 18
Non-Current Liabilities 24 25
63.681
-100
58.136
81.519
23.383 40
Provisions for Employee Benefits
99.700
7.082 07
Deferred Tax Liabilities
97.593 76
Other Non-Current Liabilities
3.898
2.273
-1.625
-42
EQUITY 9
TOTAL LIABILITIES AND EQUITY 26
Horizontal Analysis of Balance Sheet
Interpretation:
Current liabilities demonstrate a %51 increase, comparing with previous period. The increase in current financial liabilities accounts 94%, the increase in trade payables accounts 29% comparing with previous period (2010).
Non-current liabilities demonstrates a 24% increase comparing with previous period. Equity demonstrates a %9 increase and the increase in retained earnings (accounts 26%) causes 9% increase of equity.

21. THE ANALYSIS OF ARCELIK CO
BALANCE SHEET OF ARCELIK CO.
2010
2011
Increase/ Decrease %
Current Assets 27
Current Liabilities 51
TOTAL ASSETS 26
Working Capital
0,62
Horizontal Analysis of Balance Sheet
It demonstrates 62% increase in working capital.

22. INCOME STATEMENT OF ARCELİK CO.
2010
2011
Increase/ Decrease %
Sales
0,22
Cost of Goods Sold
( )
( )
0,21
Gross Profit
0,23
Operating Expenses
( )
( )
0,25
Other Operating Income
60.194
-0,54
Other Operating Expense
(58.341)
(72.857)
Operating Profit
8.244
0,01
Share of the Profit/Loss of Associates Accounted for Using the Equity Method
11.907
28.378
16.471
1,38
Financial Income
0,45
Financial Expense
( )
( )
0,69
Profit Before Tax
-0,06
Tax Expense of Current Period
(83.492)
(71.996)
11.496
-0,14
Deferred Tax Expense
(23.899)
(2.326)
21.573
-0,90
Net Profit
-8.160
-0,01
Horizontal Analysis of Income Statement It demonstrates 23% increase in gross profit. The increase in sales accounts 22% and the increase in cost of goods sold accounts 21%. The increase in financial costs accounts 69% comparing with previous period. The increase in liabilities is the reason of increase in financial expenses.

23. THE ANALYSIS OF ARCELIK CO
Trend Percentage Analysis In this analysis the trend percentages are calculated for each item by taking the figure of that item for the base year. The analyst is able to see the trend of figures, whether moving upward or downward.

24. THE ANALYSIS OF ARCELIK CO
Trend Percentage Analysis The trend percentage of current liabilities for 2009 is calculated as follows:
2008
2009
LIABILITIES
Current Liabilities
100
106

25. THE ANALYSIS OF ARCELIK CO
2008
2009
2010
2011
ASSETS
CURRENT ASSETS
100 94
107
136
Cash and Cash Equivalents
218
317
282
Financial Assets
26.039
4.444
1.185
2.932 17 5 11
Trade Receivables 87 90
124
Inventories 70 76
117
Other Current Assets
106
114
142
NON-CURRENT ASSETS 93
130 72
121 92
Investments Accounted for Using the Equity Method
105
111
Non-current Assets Held for Sale
8.788
6.344
5.480
6.441 62 73
Tangible Assets 98
Intangible Assets
109
115
195
Goodwill
10.255
7.511
7.190
1.913
Deferred Tax Assets
65.878
41.509
39.244
63.387 63 60 96
TOTAL ASSETS
134

26. THE ANALYSIS OF ARCELIK CO
2008
2009
2010
2011
LIABILITIES
Current Liabilities
100
106 78
118
Financial Liabilities 44 85
Other Financial Liabilities
5.533
698 13
2.345
3.323
Trade Payables
120
135
174
Provisions for Tax
4.063
14.356
18.970
23.250
353
467
572
Provisions
103
117
Other Liabilities
113
142
Non-Current Liabilities 27 84
104 12 77 97
72.955
67.380
63.681 92 87
53.197
60.761
58.136
81.519
114
109
153
Provisions for Employee Benefits
60.217
85.335
99.700
166
177
Deferred Tax Liabilities
91.471
95.201
141
247
Other Non-Current Liabilities
12.401
6.501
3.898
2.273 52 31 18
EQUITY
137
170
186
TOTAL 94
107
134

27. THE ANALYSIS OF ARCELIK CO
2008
2009
2010
2011
Trade Receivables
100 87 90
124
Sales
155
149
157
191
Interpretation: It demonstrates and a decrease in 2009 and 2010 but demonstrates an increase in 2011 comparing with base year. On the other hand sales demonstrates an increase in the years 2010 and 2011, comparing with the base year.

28. THE ANALYSIS OF ARCELIK CO
 BALANCE SHEET OF ARCELİK CO.
2008
2009
ASSETS
Current Assets
Cash and Cash Equivalents
Financial Assets
26.039
4.444
Trade Receivables
Inventories
Other Current Assets
Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
2008
2009
Liquidity Analysis
Current Ratio
1,48
1,31
Quick Ratio
1,01
0,99
Cash Ratio
0,14
0,28
Interpretation:
Arcelik has a positive working capital and enough liquidity to pay short term debts.
QR demonstrates that the current assets which can be convert into cash are enough to pay short term debts.
Arcelik has cash and cash equivalents which can be used to pay 14% of short term debts for the year 2008.

29. THE ANALYSIS OF ARCELIK CO
The Importance of Turnover Ratios in Determining The Liquidity of a Firm
Working capital is a measure of liquidity of a business. The working capital comprises from Cash, A/R, Inventory and A/P. As stated before, the operating cycle is a significant issue in determining the need of working capital. As a result, Turnovers of A/R, A/P and Inventory enable to determine the operating cycle of period.
If the collection period of Accounts Receivable, days to sell inventories and the pay period (day) of Accounts Payable are not harmonized, this case will affect the liquidity of a company.

30. THE ANALYSIS OF ARCELIK CO
2008
2009
ASSETS
Current Assets
Cash and Cash Equivalents
Financial Assets
26.039
4.444
Trade Receivables
Inventories
Other Current Assets
Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
2008
2009
Liquidity Analysis
Current Ratio
1,48
1,31
Quick Ratio
1,01
0,99
Cash Ratio
0,14
0,28
Activity Analysis
Inventory Turnover
3,76
4,87
Days Inventory 96 74
Acc. Receivable Turnover
2,66
2,95
Days Acc. Receivable
135
122
Acc. Payable Turnover 9 7
Days Acc. Payable 42 51
Assets Turnover
1,0
Non-Current Assets Turnover
2,81
2,91
INCOME STATEMENT
2008
2009
Sales
Cost of Goods Sold
( )
( )

31. THE ANALYSIS OF ARCELIK CO
Interpretation:
Comparing with 2008, there is a decrease in liquidity ratios. This may be caused by two case:
The operating cycle period is not compatible and
Financial structure
The turnover ratios indicate that in 2008, Arcelik pays its trade debts in 42 days and collects its trade receivables in days. There is a gap between collectable assets and trade payables. Another component of working capital is inventories and Arcelik sells its inventories in 96 days. So, the operating cycle period is not compatible and this causes a deficit in need of working capital. As seen in ratios, Arcelik shortened the turn of inventories and days of A/R, while the days of trade payables were extended.
2008
2009
Liquidity Analysis
Current Ratio
1,48
1,31
Quick Ratio
1,01
0,99
Cash Ratio
0,14
0,28
Activity Analysis
Inventory Turnover
3,76
4,87
Days Inventory 96 74
Acc.Receivable Turnover
2,66
2,95
Days Acc.Receivable
135
122
Acc. Payable Turnover 9 7
Days Acc. Payable 42 51
Assets Turnover
1,0
Non-Current Assets Turnover
2,81
2,91

32. THE ANALYSIS OF ARCELIK CO
Common-Sized Ratios (Vertical Analysis)
Solvency Ratios
2008
2009
Financial Leverage
0,71
0,57
Debt-Equity
2,43
1,34
Current Assets/Total Assets
0,64
0,65
Non-Current Assets / Total Assets
0,36
0,35
Current Liabilities/Total Assets
0,44
0,49
Non-current Liabilities/Total Assets
0,27
0,08
Equity/Total Asset
0,29
0,43
ASSETS
Current Assets
Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Non-Current Liabilities
EQUITY
TOTAL LIABILITIES AND EQUITY
Interpretation:
Arcelik financed 71% of its assets with debt. In other words, the proportion of debt is 71% in 2008 and the proportion of debt is 57% in Compared to , Arcelik shortened the usage of debt in 2009.

33. THE ANALYSIS OF ARCELIK CO
The financial ratios of Arcelik Co. and Vestel Co.
Profitability Ratios of Arcelik
2008
2009
Net Profit Margin
0,001
0,08
ROA
0,00
ROE
0,03
0,17
ROC
0,18
Financial Leverage
0,71
0,57
Profitability Ratios of Vestel
2008
2009
ROA
0,04
0,13
ROE
0,06
0,20
ROC
0,19
0,31
Financial Leverage
0,44
0,36
Interpretation:
The proportion of debt is 71% in 2008 and the proportion of debt is 57% in For , Arcelik did not take the advantage of financial leverage. Because the ROC ratio is higher than ROE. The interest costs are high for the year 2008.
But in 2009 the proportion of debt is decreased to %57. According to the comparison of ROE and ROC, we can say that Arcelik took the advantage of financial leverage for the year 2009.

34. THE ANALYSIS OF ARCELIK CO
INCOME STATEMENT
2008
2009
Increase/Decrease %
Sales
( )
(0,04)
Cost of Goods Sold
( )
( )
(0,10)
Gross Profit
0,12
Operating Expenses
Marketing and Saling Expenses
( )
( )
22.083
(0,02)
General Administrative Expenses
( )
( )
(43.644)
0,15
Research and Development Expenses
(54.517)
(48.480)
(6.037)
0,11
Other Operating Income
44.934
3,12
Other Operating Expense
(44.972)
( )
85.341
(1,90)
Operating Profit
0,70
Share of the Profit/Loss of Associates Accounted for Using the Equity Method
12.473
5.567
(6.906)
(0,55)
Financial Income
( )
(0,46)
Financial Expense
( )
( )
( )
0,50
Profit Before Tax
29.121
18,79
Tax Expense of Current Period
(29.693)
(45.910)
16.217
Deferred Tax Expense
7.128
(27.507)
(20.379)
(2,86)
Net Profit
6.556
75,73

35. THE ANALYSIS OF ARCELIK CO
Inter-company analysis of Arcelik Co. and Vestel Co.
Profitability Ratios of Arcelik
2008
2009
Gross Profit Margin
0,28
0,33
Operating Profit Margin
0,06
0,11
Pretax Margin
0,01
0,27
Net Profit Margin
0,001
0,08
Profitability Ratios of Vestel
2008
2009
Gross Profit Margin
0,10
0,17
Operating Profit Margin
0,06
0,13
Pretax Margin
0,02
0,09
Net Profit Margin
0,024
0,091

36. Profitability Ratios of Arcelik
THE ANALYSIS OF ARCELIK CO
Sectorial analysis of Arcelik Co. and Industrial Averages
Profitability Ratios of Arcelik
Industrial Averages
2008
2009
Gross Profit Margin
0,28
0,33
0,24
0,17
Operating Profit Margin
0,06
0,11
0,10
0,08
Pretax Margin
0,01
0,27
Net Profit Margin
0,001