Financial Ratios and Analysis
Financial Accounting vs. Management Accounting
Role and Primary Tasks/Services Performed by Management Accountants
Accounting is a staff function, with management accountants providing information to other managers. Information can relate to: financial statements, tax problems, dealing with governmental authorities and other matters.
The management accountant, like other staff managers, often recommends courses of action to those using the information. But neither the management accountant, nor any other staff managers, can impose recommendations on line managers. Nevertheless, because of their expertise, staff managers can influence decisions.
Management accountants discharge their responsibilities and achieve their objectives by organizing and implementing activities in the following categories:
1. Planning
2. Reporting
3. Controlling
4. Resource Management
5. Information Systems Development
6. Technological Implementation
7. Verification
8. Administration
Financial Statement Analysis – The Big Picture
FS Analysis
Involves careful selection of date from financial statements for the primary purpose of forecasting the financial health of the company.
This is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios.
Another important aspect of financial analysis is the comparison of actual financial conditions with expected financial conditions.
Expected conditions may be represented by:
a. Predetermined standards
b. Past performance
c. Competitor’s performance
d. Industry average
Financial Statements
Although are essentially historical documents, may still provide us valuable information
Approach to FS Analysis
1. Short-term solvency analysis
Refers to the analysis of the company’s ability to meet near-term demand for cash and normal operating requirements.
A company is considered in satisfactory short-term solvent position if:
a. Favorable credit
Role and Primary Tasks/Services Performed by Management Accountants
Accounting is a staff function, with management accountants providing information to other managers. Information can relate to: financial statements, tax problems, dealing with governmental authorities and other matters.
The management accountant, like other staff managers, often recommends courses of action to those using the information. But neither the management accountant, nor any other staff managers, can impose recommendations on line managers. Nevertheless, because of their expertise, staff managers can influence decisions.
Management accountants discharge their responsibilities and achieve their objectives by organizing and implementing activities in the following categories:
1. Planning
2. Reporting
3. Controlling
4. Resource Management
5. Information Systems Development
6. Technological Implementation
7. Verification
8. Administration
Financial Statement Analysis – The Big Picture
FS Analysis
Involves careful selection of date from financial statements for the primary purpose of forecasting the financial health of the company.
This is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios.
Another important aspect of financial analysis is the comparison of actual financial conditions with expected financial conditions.
Expected conditions may be represented by:
a. Predetermined standards
b. Past performance
c. Competitor’s performance
d. Industry average
Financial Statements
Although are essentially historical documents, may still provide us valuable information
Approach to FS Analysis
1. Short-term solvency analysis
Refers to the analysis of the company’s ability to meet near-term demand for cash and normal operating requirements.
A company is considered in satisfactory short-term solvent position if:
a. Favorable credit