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A STUDY ON FINANCIAL ANALYSIS PROJECT @ DOMS

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Humanities and Social Science Research

Petrit Hasanaj

The main purpose of this study is to determine, forecast and evaluate the best of economic conditions and company’s performance in the future. The other purpose of this study is to analyze the financial statement and than give information for financial managers to make through decisions about their business. The financial statement applies tools, analytical techniques and required methods for business analysis. It is a diagnostic tool for evaluating financing activities, investment activities and operational activities as well as an assessment tool for management decisions and other business decisions. The analysis of financial statements, respectively the analysis of the financial reports are used by managers, shareholders, investors and all other interested parties regarding the company's state. Managers use financial reports to see the situation in which the company stands and then provide information to shareholders, to see how reasonable are the investments made in the comp...

Sergey Krylov

The article deals with the author's approach to the analysis of corporate financial statements as a tool of financial management in modern conditions, which is based on the concept of compromise between risk and profitability, is characterized by universality and relative simplicity, involving the use of well-known financial ratios. It is shown that the analysis of corporate financial statements should include the calculation and analysis of financial ratios of risk and profitability according to its actual performance, evaluation of their relationship, adjusting the values of financial risk and profitability (if necessary), forecasting indicators of corporate financial statements, determining their absolute deviations from actual values and developing decisions on financial management of the enterprise based on these deviations. A special emphasis in the article is placed on the focus of the author's approach to the analysis of corporate financial statements as a tool of financial management to ensure an acceptable ratio of risk and profitability associated with the activities of the enterprise.

Aigul Adilkhanova

USV Annals of Economics and Public Administration

Marilena Roxana Zuca

Igor Zdravkoski

IDEAS SPREAD

The main purpose of this study is to determine, forecast and evaluate the best of economic conditions and company's performance in the future. The other purpose of this study is to analyze the financial statement and than give information for financial managers to make through decisions about their business. The financial statement applies tools, analytical techniques and required methods for business analysis. It is a diagnostic tool for evaluating financing activities, investment activities and operational activities as well as an assessment tool for management decisions and other business decisions. The analysis of financial statements, respectively the analysis of the financial reports are used by managers, shareholders, investors and all other interested parties regarding the company's state. Managers use financial reports to see the situation in which the company stands and then provide information to shareholders, to see how reasonable are the investments made in the company. To potential investors, the analysis of the financial statements of the company is very important, because, first they want to know the actual state of the company and then decide whether to invest or not.

Journal of Information Systems and Operations Management

Managerial decisions have certain aspects that are different from the analyzed perspective. From the point of view of human resources to be hired, the management of the entity takes decisions based on the amounts investes in resources and exploitation transactions as well as a proper financing mix. These are the reasons for which accuracy and the level of detail in information has to be at a higher level in order to support the business and it increase its value. The quality of decision-making is dependent to a large extent on the amount and quality of information upon which the decision is based on, which, once adopted is considered the most important process that takes place in the management of an entity. This, more so today, as IFRS generated changes in the conceptual sense of fundamental elements of financial reporting and results, as well as increased volatility of indicators results, leading to consolidation of the interest for information, analysis and decision making.

Jack Diskin

Salah Uddin Mohammad Riyadh

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Five approaches to financial statement analysis

Financial reporting is integral to a business. Any organisation, big or small, is legally required to compile comprehensive documentation of their financial activities. 

With ever-evolving legislation presenting a constant challenge to public companies, getting the stats right is essential. That’s where an analyst steps in – and as digital accounting and crypto currencies become more commonplace, the demand for new financial talent is high.

Not only is financial reporting a matter of compliance, but tracking and analysing financial performance equips business leaders and lenders with key intel to better assess the company’s current standing, predict future financial outcomes and make informed economic decisions regarding the management and direction of the organisation.

What is financial statement analysis?

Financial statement analysis is a component of accounting and key to understanding an organisation’s financial condition. External stakeholders use it to understand the overall performance and business value of an organisation, while internal constituents use it as a monitoring tool for managing finances.

Acting as a company’s financial health ‘report card’, it comprises the review of three significant financial statements that every company must maintain: the balance sheet , income statement and cash flow statement .

• Balance sheet: summary of the assets, liabilities (debt) and equity of a business at the end of an accounting period and a report of the company’s financial worth in terms of book value.
• Income statement: a detailed account of a company’s revenue earning (also known as the profit and loss statement).
• Cash flow statement: provides data on how much cash or cash equivalent circulates the company via various inflows and outflows, spanning ongoing operational activities, external investment sources and cash from financing.

As such, a financial statement analysis provides a comprehensive and unbiased overview of a company’s profitability, value, creditworthiness and financial security.

What are the five methods of financial statement analysis?

There are five commonplace approaches to financial statement analysis: horizontal analysis , vertical analysis , ratio analysis , trend analysis and cost-volume profit analysis . Each technique allows the building of a more detailed and nuanced financial profile.

Horizontal analysis

Horizontal analysis compares historical data (such as ratios and line items) and is usually depicted as a percentage growth over the same line item in the base year. This allows financiers to easily spot trends and growth patterns and forecast future projections. This type of analysis also lends insight into the operational results of an organisation and whether it is operating efficiently and profitably, and makes it easier to compare growth rates amongst sector competitors.

Vertical analysis

Vertical analysis is the proportional analysis of a financial statement, where each line item on a financial statement is listed as a percentage of another item. For example, every line item on an income statement is stated as a percentage of gross sales, while every line item on a balance sheet is stated as a percentage of total assets. This gives analysts an understanding of overall performance in terms of revenue and expenses.

Ratio analysis

Ratio analysis allows for meaningful comparison between the different elements of a financial statement and is used to reveal a general upward or downward trend. It’s a quick method to obtain an overview of a company’s financial health, but also more granular relationships between data, such as debt and equity or price versus earnings, in addition to liability areas such as staff turnover. Once a ratio has been calculated, it can be compared against the previous period, which is crucial for setting performance targets.

Trend analysis

Trend analysis uses historical data (such as price movements and trade volume) to forecast the long-term direction of market sentiment. It’s based on the idea that what has transpired in the past will occur again in the future, which helps a business to better predict and prepare for upward trends and reversals within particular market segments. Trend analysis is a useful technique as moving with trends (and not against them) will result in profit for an investor.

Cost volume profit analysis

This analysis technique helps businesses better understand the relationship between sales, costs, and business profit. It examines the fixed cost and variable cost and establishes the relationship between sales and variable cost to help business leaders better plan and project profit.

How does financial statement analysis help an organisation?

Financial statement analysis is not only crucial for complying with business laws and regulations, but the data can serve the organisation in a multitude of ways.

Through financial statement analysis, business owners can identify and determine their financial strengths and weaknesses, keep current on their debts and determine their profit margins.

Financial statements are critical when seeking company partners and securing investment capital. The data determines if a company is making money, but also helps investors identify a reasonable cost per share. An unbiased financial profile is equally crucial when claiming funds or applying for loans from lending institutions. 

Analysing the financial statements from quarter to quarter and year to year help business owners see trends in growth and formulate new strategies to consider any risks posed to the wider market.

Furthermore, the analysis helps to measure a company’s financial performance against the wider sector, giving business owners an understanding of how they compare to their top competitors.

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RESEARCH METHODOLOGY

The procedure adopted for conducting the research require a lot of Attention as it has direct bearing on accuracy, reliability and adequacy of results. It is due to this reason that research methodology, which we used at the time of conducting the research, needs to be elaborated upon. It may be understood as a science of study how research methods, but also considers the logic behind the method used in the context of the research study. Research methodology is a way to systematically study and solve the research problem. If a researcher wants to claim his study as a good study, he must clearly state the methodology adopted in conducting the research, so that it was be judged by the reader whether the methodology of work done is sound or not.

The research methodology

includes:-4) Research design

5) Data collection method

6) Analysis and interpretation of data 7) Limitation of study

3.1 OBJECTIVE OF THE STUDY

Objectives are the ends that states specifically how goal be achieved. Every study must have an objective for which all the efforts have been done. Without objective no research can be conducted and no result can be obtained.

On the basis of objective all the research process is followed. Objectives are the main aspect of every study.

The objective of the study gives direction to go through the research problem. It guides the researcher and keeps him on track. I have two objectives regarding my research project.

These are shown below:- A. Primary objective

B. Secondary objective

 A. Primary

objective:-1) To study the software used in PNB Bank.

2) To analyze the financial statements of the corporation to assess its true financial position by the use of ratios.

B. Secondary

objective:-1) To find out the shortcomings in PNB Bank.

IMPORTANCE OF THE STUDY

-By “FINANCIAL PERFORMANCE ANALYSIS OF ICICI Bank” we would be  able to get a fair picture of the financial position of ICICI Bank.

-By showing the financial performance to various lenders and creditors it is possible to get credit in easy terms if good financial condition is maintained in the company with assets outweighing the liabilities.

-Protecting the property of the business -Compliance with legal requirements.

3.2 MEANING OF RESEARCH

Research is defined as “a scientific and systematic search for pertinent information on a specific topic”. Research is an art of scientific investigation. Research is a systematized effort to gain new knowledge. It is a careful investigation or inquiry especially through search for new facts in any branch of knowledge. Research comprises defining and redefining problem, formulating, hypothesis or suggested solutions.

Making deductions and research conclusion to determine whether they if the formulating hypothesis.

Research is thus, an original contribution to the existing stock of knowledge making for its advancement. The search for knowledge through objective and systematic method of finding solutions to a problem is research.

3.3 RESEARCH PROBLEM

researcher has to face many problem which conducting any research that’s why problem statement is defined to know which type of problem a researcher has to face while conducting any study.

It is said that:

“Problem well defined is problem half solved” .

Basically a problem statement refers to some difficulty, which researcher experience in the context of either a theoretical or practical solution or wants to obtain the solution for the same.

Hare the problem statement is:

“To make financial analysis statement of PNB Bank”.

3.4 RESEARCH DESIGN

 A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. Research design is the conceptual structure with in which research in conducted. It constitutes the blueprint for the collection measurement and analysis of data. Research design includes an outline of what the researcher will do form writing the hypothesis and it operational implication to the final analysis

specifying which approach will be used for the gathering and analyzing the data. It also include the time and cost budget since most studies are done under these two constraints. The design is such studies must be rigid and not flexible and most focus attention on the following:

 What is the study about?

 Why is the study being made?

 Where will the study be carried out?

 What type of data is required?

 What period of time will the study include?

 What will be sample design?

 How will the data analyzed?

Type of research

design:-I. Exploratory research design II. Experimental research design III. Descriptive research design IV. Diagnostic research design

I. Exploratory research design:- This research design is preferred when researcher has a vague idea about the problem the researcher has to explore the subject.

II. Experimental Research Design:-  The research design is used to provide a strong basis for the existence of casual relationship between two or more variables.

III. Descriptive Research Design:- It seeks to determine the answers to who, what, where, when and how questions. It is based on some previous understanding of the matter.

IV. Diagnostic Research Design:- It determines the frequency

RESEARCH DESIGN USED IN THE STUDY:

Descriptive research design is used in this study because it will ensure the minimization of bias and maximization of reliability of data collected. Descriptive study is based on some previous understanding of the topic. Research has got a very specific objective and clear cut data requirements the researcher had to use fact and information already available through financial statements of earlier years and analyze these to make critical evaluation of the available material.

Hence by making the type of the research conducted to be both Descriptive and Analytical in nature.

3.5 DATA COLLECTION METHOD

The process of data collection begins after a research problem has been defined and research design ahs been chalked out.

There are two types of data –

 PRIMARY DATA

-It is first hand data, which is collected by researcher itself.

Primary data is collected by various approaches so as to get a precise, accurate, realistic and relevant data. The main tool in gathering primary data was investigation and observation. It was achieved by a direct approach and observation from the officials of the company.

 SECONDARY DATA

-It is the data which is already collected by someone else.

Researcher has to analyze the data and interprets the results. It

Type of data used in the

study:-The required data for the study are basically Secondary in nature and the data are collected

from- The audited reports of the company.

   INTERNET:- which includes required financial data collected from PNB Bank official website i.e.

www.pnbindia.in and some other website on the internet for the purpose of getting all the required financial data of the bank.

3.6 ANALYSIS AND INTERPRETATION

The data collected were edited, classified and tabulated for analysis. The analytical tools used in this study

are:- Comparative balance sheet

 Ratio analysis

 Cash flow statement

3.7 LIMITATION OF THE STUDY

 Difficulty in data collection.

 Limited knowledge about the bank in initial stage.

   The analysis and interpretation are used on secondary

   Inter firm comparison was not possible due to the non availability of competitors data.

 The study of financial performance can be only a mean to know about the financial condition of the company and cannot show a through picture of the activity of the company.

CHAPTER NO. 4

Data analysis and interpretation.

• PROFILE OF PNB BANK
• RESEARCH METHODOLOGY (You are here)

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Financial Analysis of Projects

• First Online: 30 November 2023

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• Steve Curry 3 &
• John Weiss 4  

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The techniques discussed in the earlier chapters apply to analyses in both economic and financial terms and both types of analysis are required. While this book focuses principally on economic analysis, the economic viability of projects depends on the financial sustainability of the management unit implementing and operating the project. The economic benefits will occur only if the financial resources are available to undertake the investment and maintain project operations. Project analysis at economic prices to judge whether an investment is worthwhile must be accompanied by an analysis at financial prices. For revenue generating projects, the financial return of the project must be compared with its financial obligations in order to assess its financial sustainability. Financial sustainability is taken up in the first section of this chapter.

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There may be a required financial return for government corporate investment that can approximate this. In theory it will depend on how the equity is financed and the cost of raising additional funding.

However, if investment funding for infrastructure comes from the private sector the required return of the investor may be very high because of the perceived risk. In such cases the FCIC will also be high and various guarantees may be needed from government on repayments to access funding.

The fact that quantity of water is also discounted often causes confusion. The AIC should be interpreted as the charge which if imposed on output in each year of the project life will allow the project to cover all its costs, both capital and O & M. To derive this the AIC must be the ratio of discounted costs to discounted physical output.

See the discussion on the shadow exchange rate in Chap. 5 .

Bibliography

ADB. (2019, October). Financial Analysis and Evaluation: Technical Guidance Note . Asian Development Bank.

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Jenkins, G., Kuo, C.-Y., & Harberger, A. (2018). Cost Benefit Analysis for Investment Decisions . Cambridge Resources International.

Potts. (2002). Project Planning and Analysis for Development . Lynne Rienner.

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Curry, S., Weiss, J. (2023). Financial Analysis of Projects. In: Project Analysis in Developing Countries. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-40014-8_12

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What Is Financial Analysis?

Understanding financial analysis, corporate financial analysis, investment financial analysis, types of financial analysis, horizontal vs. vertical analysis.

• Example of Financial Analysis
• Financial Analysis FAQs

The Bottom Line

• Corporate Finance
• Financial statements: Balance, income, cash flow, and equity

Financial Analysis: Definition, Importance, Types, and Examples

Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability. Typically, financial analysis is used to analyze whether an entity is stable, solvent , liquid , or profitable enough to warrant a monetary investment.

Key Takeaways

• If conducted internally, financial analysis can help fund managers make future business decisions or review historical trends for past successes.
• If conducted externally, financial analysis can help investors choose the best possible investment opportunities.
• Fundamental analysis and technical analysis are the two main types of financial analysis.
• Fundamental analysis uses ratios and financial statement data to determine the intrinsic value of a security.
• Technical analysis assumes a security's value is already determined by its price, and it focuses instead on trends in value over time.

Investopedia / Nez Riaz

Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. This is done through the synthesis of financial numbers and data. A financial analyst will thoroughly examine a company's financial statements —the income statement , balance sheet , and cash flow statement . Financial analysis can be conducted in both corporate finance and investment finance settings.

One of the most common ways to analyze financial data is to calculate ratios from the data in the financial statements to compare against those of other companies or against the company's own historical performance.

For example, return on assets (ROA) is a common ratio used to determine how efficient a company is at using its assets and as a measure of profitability. This ratio could be calculated for several companies in the same industry and compared to one another as part of a larger analysis.

There is no single best financial analytic ratio or calculation. Most often, analysts use a combination of data to arrive at their conclusion.

In corporate finance, the analysis is conducted internally by the accounting department and shared with management in order to improve business decision making. This type of internal analysis may include ratios such as net present value (NPV) and internal rate of return (IRR) to find projects worth executing.

Many companies extend credit to their customers. As a result, the cash receipt from sales may be delayed for a period of time. For companies with large receivable balances, it is useful to track days sales outstanding (DSO), which helps the company identify the length of time it takes to turn a credit sale into cash. The average collection period is an important aspect of a company's overall cash conversion cycle .

A key area of corporate financial analysis involves extrapolating a company's past performance, such as net earnings or profit margin , into an estimate of the company's future performance. This type of historical trend analysis is beneficial to identify seasonal trends.

For example, retailers may see a drastic upswing in sales in the few months leading up to Christmas. This allows the business to forecast budgets and make decisions, such as necessary minimum inventory levels, based on past trends.

In investment finance, an analyst external to the company conducts an analysis for investment purposes. Analysts can either conduct a top-down or bottom-up investment approach. A top-down approach first looks for macroeconomic opportunities, such as high-performing sectors, and then drills down to find the best companies within that sector. From this point, they further analyze the stocks of specific companies to choose potentially successful ones as investments by looking last at a particular company's  fundamentals .

A bottom-up approach, on the other hand, looks at a specific company and conducts a similar ratio analysis to the ones used in corporate financial analysis, looking at past performance and expected future performance as investment indicators. Bottom-up investing forces investors to consider  microeconomic  factors first and foremost. These factors include a company's overall financial health, analysis of financial statements, the products and services offered, supply and demand, and other individual indicators of corporate performance over time.

Financial analysis is only useful as a comparative tool. Calculating a single instance of data is usually worthless; comparing that data against prior periods, other general ledger accounts, or competitor financial information yields useful information.

There are two types of financial analysis: fundamental analysis and technical analysis .

Fundamental Analysis

Fundamental analysis uses ratios gathered from data within the financial statements, such as a company's earnings per share (EPS), in order to determine the business's value. Using ratio analysis in addition to a thorough review of economic and financial situations surrounding the company, the analyst is able to arrive at an intrinsic value for the security. The end goal is to arrive at a number that an investor can compare with a security's current price in order to see whether the security is undervalued or overvalued.

Technical Analysis

Technical analysis uses statistical trends gathered from trading activity, such as moving averages (MA). Essentially, technical analysis assumes that a security’s price already reflects all publicly available information and instead focuses on the  statistical analysis of price movements . Technical analysis attempts to understand the market sentiment behind price trends by looking for patterns and trends rather than analyzing a security’s fundamental attributes.

When reviewing a company's financial statements, two common types of financial analysis are horizontal analysis and vertical analysis . Both use the same set of data, though each analytical approach is different.

Horizontal analysis entails selecting several years of comparable financial data. One year is selected as the baseline, often the oldest. Then, each account for each subsequent year is compared to this baseline, creating a percentage that easily identifies which accounts are growing (hopefully revenue) and which accounts are shrinking (hopefully expenses).

Vertical analysis entails choosing a specific line item benchmark, then seeing how every other component on a financial statement compares to that benchmark. Most often, net sales is used as the benchmark. A company would then compare cost of goods sold, gross profit, operating profit, or net income as a percentage to this benchmark. Companies can then track how the percent changes over time.

Examples of Financial Analysis

In the nine-month period ending Sept. 30, 2022, Amazon.com reported a net loss of $3 billion. This was a substantial decline from one year ago where the company reported net income of over $19 billion.

Financial analysis shows some interesting facets of the company's earnings per share (shown above. On one hand, the company's EPS through the first three quarters was -$0.29; compared to the prior year, Amazon earned $1.88 per share. This dramatic difference was not present looking only at the third quarter of 2022 compared to 2021. Though EPS did decline from one year to the next, the company's EPS for each third quarter was comparable ($0.31 per share vs. $0.28 per share).

Analysts can also use the information above to perform corporate financial analysis. For example, consider Amazon's operating profit margins below.

• 2022: $9,511 / $364,779 = 2.6%
• 2021: $21,419 / $332,410 = 6.4%

From Q3 2021 to Q3 2022, the company experienced a decline in operating margin, allowing for financial analysis to reveal that the company simply earns less operating income for every dollar of sales.

Why Is Financial Analysis Useful?

The financial analysis aims to analyze whether an entity is stable , liquid, solvent, or profitable enough to warrant a monetary investment. It is used to evaluate economic trends, set financial policies, build long-term plans for business activity, and identify projects or companies for investment.

How Is Financial Analysis Done?

Financial analysis can be conducted in both corporate finance and investment finance settings. A financial analyst will thoroughly examine a company's financial statements—the income statement, balance sheet, and cash flow statement.

One of the most common ways to analyze financial data is to calculate ratios from the data in the financial statements to compare against those of other companies or against the company's own historical performance. A key area of corporate financial analysis involves extrapolating a company's past performance, such as net earnings or profit margin, into an estimate of the company's future performance.

What Techniques Are Used in Conducting Financial Analysis?

Analysts can use vertical analysis to compare each component of a financial statement as a percentage of a baseline (such as each component as a percentage of total sales). Alternatively, analysts can perform horizontal analysis by comparing one baseline year's financial results to other years.

Many financial analysis techniques involve analyzing growth rates including regression analysis, year-over-year growth, top-down analysis such as market share percentage, or bottom-up analysis such as revenue driver analysis .

Last, financial analysis often entails the use of financial metrics and ratios. These techniques include quotients relating to the liquidity, solvency, profitability, or efficiency (turnover of resources) of a company.

What Is Fundamental Analysis?

Fundamental analysis uses ratios gathered from data within the financial statements, such as a company's earnings per share (EPS), in order to determine the business's value. Using ratio analysis in addition to a thorough review of economic and financial situations surrounding the company, the analyst is able to arrive at an intrinsic value for the security. The end goal is to arrive at a number that an investor can compare with a security's current price in order to see whether the security is undervalued or overvalued.

What Is Technical Analysis?

Technical analysis uses statistical trends gathered from market activity, such as moving averages (MA). Essentially, technical analysis assumes that a security’s price already reflects all publicly available information and instead focuses on the statistical analysis of price movements. Technical analysis attempts to understand the market sentiment behind price trends by looking for patterns and trends rather than analyzing a security’s fundamental attributes.

Financial analysis is a cornerstone of making smarter, more strategic decisions based on the underlying financial data of a company. Whether corporate, investment, or technical analysis, analysts use data to explore trends, understand growth, seek areas of risk, and support decision-making. Financial analysis may include investigating financial statement changes, calculating financial ratios, or exploring operating variances.

Amazon. " Amazon.com Announces Third Quarter Results ."

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