Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the Enterprise- debts of an enterprise for the goods- deferred income- bank loan- buildings and constructions- cash on bank account- stock in warehouse- cash in till of an enterprise- profit- trade accounts receivable (customer debts);- prepaid expense.Exercise 2Draw up a balance sheet:- equity – 36,000- equipment – 18,500- stock of raw materials – 2,500- transport vehicles – 6,300- accounts receivable – 2,650- stock of goods – 3,500- cash on bank account – 3,550- accounts payable - ?Exercise 3Are the following statements true or false?Assets on the balance sheet of an enterprise provide with the following information:- asset condition in an enterprise;- position of accounts payable;- net turnover of an enterprise;- sources of enterprise assets;- amount of current assets;- size of equity;- enterprise costs.Liabilities on the balance sheet of an enterprise provide with the following information:- on taxes outstanding;- revenue earned by the enterprise;- profit made by the enterprise;- investments made by the enterprise in securities;- trade accounts receivable;- long-term investments made by the enterprise.64
Analysis of the Operation and Financial Condition of the Enterprise4. Financial analysis measures (ratios)4.1. Description of financial ratios4.2. Liquidity measures4.3. Solvency measures4.4. Activity measures4.5. Profitability measures4.1. Description of financial ratiosFinancial ratio analysis shows the financial proportions between various statementitems. The advantage of the financial ratios is that they can be easily calculated. Theconcept of this method is expressed in calculation of the respective ratio and itscomparison to a certain basis, for example:• generally accepted measures;• industry average figures;• analogue figures of the previous years:• figures of competitor enterprises;• any other measures form the estimates of an analysis.It is believed that, if the actual value of financial ratios is worse than that of thereference values, it is an indicator of the most vulnerable areas in the enterpriseperformance that require additional analysis to be performed. Further analysis may notnecessarily confirm the previously made negative assessment. In some cases some ratiovalues do not conform to a generally accepted standard due to some specific, particularcircumstances or enterprise policies.Ratios are important for to the management of an enterprise due to the fact thataccording to these ratios shareholders and creditors may draw their conclusions about thestate of the business activities of an enterprise. Therefore, upon passing of any decisionmanagers need to assess the effect of this decision on the most significant financial ratios.The direct appraisal is based on the underlying main performance measures. Directappraisal of the profit and loss account, appraisal of the balance sheet and studying ofdifferent prime data lies at the basis of the direct appraisal.For example, the assessment of profit and loss consists of the following:• assessment of turnover;• assessment of gross profit;• assessment of net profit.Thus the turnover of an enterprise is the enterprise revenue from sales ofproduction or goods. In assessment of the turnover of an enterprise the data of previousyears need to be compared with the projected data (if established). There are severalreasons for variances between these data. Both price changes and sales volume andstructural changes need to be considered here.Changes in gross profit occur due to both the differences in the turnover (sales)and the costs of sales and distribution and production. Changes in turnover were alreadydiscussed, but changes in the costs of sales and distribution and production may also be65
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Terms of ReferenceAnalysis of the O
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