Name : Andris Nosa Aldona

NIM : C1B019096
Summary Assignment 3

“Analysis of Financial Statement”

Financial statement analysis is the process of reviewing and analyzing a company's

financial statements to make better economic decisions to earn income in future. These
statements include the income statement, balance sheet, statement of cash flows, notes to
accounts and a statement of changes in equity. One of the purpose of financial statement
analysis is knowing the changes in the company's financial position in a certain period so that
the company can take steps what must be done next.

• Ratio analysis
• Du Pont system
• Effects of improving ratios
• Limitations of ratio analysis

Ratio analysis is the comparison of line items in the financial statements of a business.
Ratio analysis is used to evaluate a number of issues with an entity, such as its liquidity,
efficiency of operations, and profitability. This type of analysis is particularly useful to
analysts outside of a business, since their primary source of information about an
organization is its financial statements. Ratio analysis is less useful to corporate insiders, who
have better access to more detailed operational information about the organization. Ratio
analysis is particularly useful when used in the following two ways:
1. Trend line. Calculate each ratio over a large number of reporting periods, to see if
there is a trend in the calculated information. The trend can indicate financial
difficulties that would not otherwise be apparent if ratios were being examined for
a single period. Trend lines can also be used to estimate the direction of future
ratio performance.
2. Industry comparison. Calculate the same ratios for competitors in the same
industry, and compare the results across all of the companies reviewed. Since
these businesses likely operate with similar fixed asset investments and have
similar capital structures, the results of a ratio analysis should be similar. If this is
not the case, it can indicate a potential issue, or the reverse - the ability of a
business to generate a profit that is notably higher than the rest of the industry.
The industry comparison approach is used for sector analysis, to determine which
businesses within an industry are the most (and least) valuable.
The inventory turnover ratio is an efficiency ratio that shows how effectively
inventory is managed by comparing cost of goods sold with average inventory for a period.
This measures how many times average inventory is “turned” or sold during a period. In
other words, it measures how many times a company sold its total average inventory dollar
amount during the year. A company with $1,000 of average inventory and sales of $10,000
effectively sold its 10 times over. This ratio is important because total turnover depends on
two main components of performance. The first component is stock purchasing. If larger
amounts of inventory are purchased during the year, the company will have to sell greater
amounts of inventory to improve its turnover. If the company can’t sell these greater amounts
of inventory, it will incur storage costs and other holding costs. The second component is
sales. Sales have to match inventory purchases otherwise the inventory will not turn
effectively. That’s why the purchasing and sales departments must be in tune with each other.
 When condition deposit 60% and loan 35% its good for our company. Because
our company can loan from bank and then the capital will deposit on another bank. It
will make our company profit.
The Type of liquid
1. Liquid & solvable
2. Illiquid but solvable
3. Liquid but insolvable
4. Illiquid & insolvable

Inventory = the lowest liquidity

Never hold cash for use. Because holding cash will never make a profit.
The higher inventory turnover tghe greater company.