Analysis Financial Report Yulriani Sambara (46110017)

Yulriani Sambara

46110017

3b-d4

Business English Task

Financial Statement Analysis

“Cash Reinvestment Ratio”

A.    Definition of Financial Statement Analysis

Analysis of Financial Statements is a systematic process of the critical examination  the financial information contained in the financial statements in order to understand and make decisions regarding the operations in the firm.

B.     The method used in Financial Statement Analysis

1.      Vertical Analysis

Analyzing a single period financial statement works well with vertical analysis. On the income statement, percentages represent the correlation of each separate account to net sales. Express all accounts other than net sales as a percentage of net sales. Net income represents the percentage of net sales not used on expenses. For example, if expenses total 69 percent of net sales, net income represents the remaining 31 percent. Vertical analysis performed on balance sheets uses total assets and total liabilities for comparison of individual balance sheet accounts.

2.      Horizontal Analysis

Horizontal analysis is the comparison of data sets for two periods. Financial statements users review the change in data much like an indicator. Optimistic analysts look for growth in revenue, net income and assets in addition to reductions in expenses and liabilities. Calculating absolute dollar changes requires the user to subtract the base figure from the current figure. Expressing changes with percentages requires the user to divide the base figure by the current figure, and multiply by 100.

3.      Trend Analysis

Review of three or more financial statement periods typically represents trend analysis, a continuation of horizontal analysis. The base year represents the earliest year in the data set. Although dollars can represent subsequent periods, analysts commonly use percentages for comparability purposes. Users review statements for patterns of incremental change representing changes in the business in questions. Financial statement improvements include increased income and decreased expenses.

4.      Ratio Analysis

Ratios express a relationship between two more financial statement totals, and compare to budgets and industry benchmarks. Five common categories of ratios exist: liquidity, asset turnover, leverage, profitability and solvency. Reviewing ratios for performance compared with prior periods or industry specific benchmarks provides financial statements users with recognition of strengths and weaknesses. Risk Management Association, or RMA, publishes data on industry specific benchmarks for more in-depth analysis.

C.     The purpose of financial analysis

1.      Profitability

Profitability is the ability of the company to generate a profit and sustain growth in both short term and long term. Profitability of the company is usually seen from the company's profit and loss (income statement) that shows the performance results of the company's report.

2.      Solvency

Solvency is the ability of a business to have enough assets to cover its liabilities.

3.      Liquidity

Liquidity This analysis relates to the ability of the company to meet its short-term liabilities (short-term liabilities). Liquidity analysis is used to measure a company's financial position in the short term.

4.      Stability

Stability is the ability of the company to maintain its business in the long term without having to suffer losses. Used to assess the stability of the company's income statement and balance sheet (balance sheet) as well as the company's various financial and non-financial indicators of other.

D.    Definition of Financial Statements

Financial statements are a collection of reports about an organization's financial results and  the financial position of the company.

E.     Cash Flow Statement Analysis 

Analyze the sources and uses of cash in a company, regarding cash inflow and  cash outflow of a company. To measure the cash flow of a company, we can use these ratio:

1.      Operating cash flow to current liabilities ratio

2.      Operating cash flow to total liabilities ratio

3.      Operating cash flow to total assets ratio

4.      Cash flow adequacy ratio (CFAR)

5.      Cash reinvestment ratio (CRR)

F.      CASH REINVESTMENT RATIO

Cash reinvestment ratio (CRR) is an analysis technique who measure how big investment in assets who describing operating cash flow who detained and invested re-within company for replace assets and supports the growth of company's operations. The greater the value this ratio then it increasingly good for the company.

Formula of cash reinvestment ratio:

CRR =              operating cash flow        –             Dividends

            Gross fixed asset + investment + other asset + working  capital

Example:  Lion Metal Works Ltd

	2010	2009
Operating  cash flow	32.525.842	50.456.390
Dividend  Pay Out	7.022.160	7.022.160
Gross fixed asset	75.705.511	73.182.111
Investment	-4.203.548	3.036.005
Other Assets	0	0
Working  Capital	242.535.343	208.317.379
CRR	8,1 %	15,2%

G.    Conclusion

In 2009, Lion Metal Works Ltd and Subsidiaries reinvesting cash from operations by 15,2% to replace assets and support the company's growth. Whereas in 2010, the company invested its operating cash back of 8,1%.

ANALYSIS FINANCIAL REPORT MUNADIA (46110036)

Financial Statement Analysis

Liquidity analysis

Current Ratio

By Munadia

3B D4/46110036

Financial statement analysis is a method that can be used in the financial statements users explore information about the company.

Who are interested in the analysis of financial statements as well as the users of financial statements?

1.      Investor

2.      Employee

3.      Creditor

4.      Customer

5.      Supplier

6.      Government

7.      Community

Analysis of financial statements covering four main financial aspects, namely:

1.      Liquidity analysis

Analysis of liquidity is the ratio that indicates a company's ability to meet its short term obligations

2.      Solvency analysis

3.      Profitability analysis

4.      Analysis of cash flows

5.       Bankruptcy Prediction analysis

6.      Risk  analysis

7.      Investment analysis

The method used in analysis

The current ratio (current ratio) indicates a company's ability to cover its current liabilities with current assets owned.

Formula of current     =        Total Current Assets

                                                Total Current Liabilities

Financial statements:

-          Balance Sheet

-          Statements of Income

-           Statement of Changes in Shareholder’s equity

-          Statement of Cash flow

-          Notes to the consolidated financial statements         

To determine the current ratio can be seen from the financial statements on Balance sheet.

The analysis process/procedure

Current ratio is calculated using the following formula:

Current Ratio =         Total Current Assets

                                Total Current Liabilities               Total Current Assets

                                                                                        

Example: Current Ratio =   89.000         ->   total current asset

                                                61.000         ->            TotalCurrent Liabilities

                                          =      1,46

Interpretation:

Current ratio of Rp 1,46 in 2011 showed that for every Rp  1 of current liabilities provided or secured by current assets amounting to Rp 1,46. This means that there is a safety margin (margin of safety) of Rp 0,46.

Advantages of Calculating Current Ratio Analysis

Current ratio of a company shows that whether a company is able to pay its short term obligations in the current fiscal year. The higher number of the current ratio is an indicator of company’s financial strength and market becomes sure about the stability of the company. The lower the current ratio the greater is the risk of liquidity associated with the company.