Financial Statement and Environment

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Discuss the results of financial analysis that are dependent on the objective of the analysis, the perception of the analyst, and the context within which the decision is to be made.

The results of a financial analysis may vary from how the firm works or operating lately. When we say financial analysis, it is a general term for the studying of the operation of a business or company. It is where analyst try to put together the data that might help them conclude whether the firm is doing good or not. The objective of the analysis is to look for further changes to be made, or if the firm is still achieving its goal and objective. While the context within which or what decision should be made after depends on the conclusion of the analysis. It varies and is not all the same since there are also changes in situation.

Discuss the three basic decision areas dealt with by managers. What are the items involved in these decisions.

There are three basic decision area which managers are dealing with. These areas are operating decision, investment decision, and financing decision. In operating decision, it deals with the everyday operation of the firm in which it concerns the decisions to be made when it comes to pricing, production processes, and even the maintenance. While investment decision deals with the project to take control of, assets to acquire, and other investments of the firm. On the other hand, there is also this area which concerns the capital of the firm or their funds which is under the financing decision. These three areas were divided since they also play different roles in the manager’s decision-making as well as in the general operation of the firm.

Discuss the steps in analyzing financial statements.

The first step in analyzing financial statements is basically an understanding of the data and information provided in the statements. It is the first step because a financial analysis would not be done if analyst do not have basic understanding to what is being studied about in the financial statements. Second is, if a data was already presented, there should be decisions to be made. The decision and conclusion from the data presented should be logically concluded and decided. While the next step is, knowing the conclusion and decisions to be made, they should be appropriate. In this step, the final decision and conclusion should be studied well and are appropriate with the data presented. Lastly, the management should understand the benefit of understanding finance and accounting so they could be able to appreciate the benefit it could give to the firm and the management.

What is horizontal analysis? What purpose will it serve?

Horizontal analysis is also known as trend analysis. It compares the financial statements to established new changes. For example, there are changes in amounts and percentages, horizontal analysis serves as the presentation of these sudden changes.

What is vertical analysis? How is it useful?

Vertical analysis concerns comparing of one number to another. There are two types of vertical analysis, the Common Size Statements and Ratio Analysis. Common Size Statements are financial statements translated into percentage where other elements are being compared. While Ratio Analysis shows relationships within a period and between the periods.

What is an option? What is an options market?

An option is basically the choices you have or other choices you have aside from the main option. In market, there are options market which are eventually the markets where they are not the priority but rather hides along as options of the buyers or investors. They belong to the other choices of the buyers.

Differentiate over-the-counter market from organized market.

Over-the-counter market is way different from organized market. When we say over-the-counter, it means that there are products being sold just by the counter and not properly organized, just like the in the organized market.

What are the types of dividends?

The types of dividends are dividends out of earning, liquidating dividends, and stock options. Dividends out of earning are the share of the stockholder that depends on the profit of the business, while liquidating dividends are the return in the capital. Also, stock options are options given to the stockholders to purchase additional shares of stocks to maintain their ownership in a corporation.