Financial Performance Analysis - Free eBook in PDF Format

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Financial Performance eBook  

Book Description - ISBN 978-1-62620-957-2 (40 Pages)
This free eBook explains how to use key accounting ratios to help you to make informed management decisions about the financial status of other organizations.

Chapter 1 - Financial Statement Analysis
The financial position of another organization can be determined using 'key accounting ratios' derived from information in the organization's income statement, balance sheet, cash flow statement, and statement of retained earnings. These can either be benchmarked against past performance or another organization in the same business area.

Chapter 2 - Key Accounting Ratios
It is important to know something about how an organization operates and what the accepted practices are within it's industry before drawing conclusions from key accounting ratios.

Chapter 3 - Types of Key Accounting Ratios
There are several different key accounting ratios that can be classified by the characteristic they measure: for example, solvency, profitability, performance, and investment history. The trend over time is often more revealing than any one figure in isolation.

Chapter 4 - Current Ratio Analysis
The current ratio and quick ratio can help you to determine whether an organization is solvent. The quick ratio does not include the value of stock within current assets and is therefore a better indication of liquidity.

Chapter 5 - Calculating Profit
You can see if an organization is profitable by looking at the income statement, but you need to put that profit into perspective. This can be done by looking at various ratios that compare profit as a percentage of sales or assets.

Chapter 6 - Business Performance Ratios
Ratios for measuring performance include: gearing, number of days credit granted, number of days credit taken, stock turnover, and overheads as a percentage of turnover.

Chapter 7 - Price/Earnings Ratios
A P/E ratio can be thought of as the length of time a stock will take to pay back the investment if there is no change in the business. The P/E ratio can be used to compare an organization to others in the industry same sector or to market indexes e.g. S&P 500, FTSE 100, etc. This ability to make such comparisons is one of the reasons it is widely used by management. It also offers the flexibility to use either quarterly or annual data. Many management teams use sites such as Reuters' comparison tables to help with this activity.

Chapter 8 - Price-to-Book Ratio
The price-to-book (P/B) ratio represents the value of the company if it is broken up and sold. The book value usually includes equipment, buildings, land, and anything else that can be sold, including stock holdings and bonds.

Chapter 9 - PEG (Price/Earnings to Growth) Ratio
The PEG (Price/earnings to growth) ratio illustrates the relationship between stock price, earning per share, and an organization's expected growth rate.

Chapter 10 - Dividend Yield
The dividend yield is used to calculate the earnings on investment (shares) considering only the returns in the form of total dividends declared by an organization during the year.

You will learn:
  • How key accounting ratios can be derived from readily available financial statements
  • How to tell if a business is solvent by using the current ratio and the quick ratio
  • How to tell if a business is profitable and to put any profit into perspective by looking at ratios that compare profit as a percentage of sales or assets
  • How to look at individual parts of the business to gain insight into their individual profitability and efficiency
  • How to assess the investment potential and overall health of an organization

Highly Recommended
Financial performance is one of the most important parts for any business. It does not matter how good your company is or how great your product is if you have poor financial performance. Poor financial performance can mean the end of a business. As a manager, I take our financial performance seriously. If I want to keep my job then this is something I must constantly improve upon. Im always looking for ways to improve our performance, and I find myself reading about this often. This is one of the best books that I have come across. It gets the point across in a short amount of time.

If you are a beginner you will most likely need to read the other books of this series since they thoroughly describe portions of this book such as, income statement, balance sheet, cash flow statement, etc. You will need to have an understanding of some of these terms to completely understand your financial performance. If you are unfamiliar with some of those terms you must read the other books or this book probably won't make very much sense to you. I feel like this book is intended for people who have some knowledge of the financial world.

If you are completely new to a financial setting this book may be a bit over your head. If you find that to be the case then you can simply go back to the "financial skills" series and start from there. By the time you finish this book you will be able to understand everything that was outlined in the Preface of this book. I was a beginner to the finance world before I read this book along with the other books from the series. Today I understand and can even explain most of the terms listed in this book in depth.

I highly recommend this book to other managers because understanding your financial performance is a must for every manager.
Derrick Schultz


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