Analyze Financial Statements
Answer the questions below based on your financial reports, particularly the Income Statement and Balance Sheet. You may wish to discuss with your Consultant more about the use of a balance sheet and an income statement to evaluate your company’s performance. Question: If a shareholder receives $. 10 after three months on a $2.00 investment, what is the percentage rate of return on an annualized (one year) basis? Answer: $.10 on a $2.00 investment is 5% if the investment period is one year. Since the period in this case is only three months, or one quarter of a year, the annual return is 20%. Check the financial pages of a newspaper to compare this with the return on a government bond or a common stock. 1. What are your company’s assets?
2. What are your company’s liabilities?
3. What is your company’s net worth?
4. If your company were to end operations today, how much would your after-tax profits be?
5. How much of the profit should be shared with the shareholders? Explain your reasoning.
6. What is your company’s share value at this time?
7. How much of the profit should be donated to a charity or another worthy cause?
CP-SV CA4 Analyze Financial Statements V.10
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8. Analyze the income statement and balance sheet your financial manager presented. What changes in company practices or procedures might make the business more profitable?
SUMMARY
If you are responsible for managing a department and keeping records you will be on the road to success if you keep accurate records. Make your entries as you go along rather than at the end of a lengthy period. If your records are up to date and accurate, encourage your fellow managers to do the same! If one person misses the boat on record keeping, it will impact the entire company. If you are not responsible for record keeping, but you are interested in the success of the company, be sure to ask questions during meetings which pertain to the keeping of records and the reports that should be produced and shared with the rest of the company. Each person’s input is critical to the success of the company.
CP-SV CA4 Analyze Financial Statements V.10
Supplementary