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MODULE 15.docx

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Administrative Studies
ADMS 2500
George Georgopoulos

MODULE15FINANCIALSTATEMENTANALYSISIt is the comprehensive consideration of both quantitative and qualitative factors undertaken to help predict future financial performance Quantitative factorsthose which can be expressed numerically and can be quantified Qualitative factorsthose which are expressed in words and may only be intuitively sensed Financial accountingthe generation and publication of general purpose financial statements for the use of external users Investors and creditors use the information from the financial statements to predict future financial performance They consider quantitative and qualitative factors Because of the vast amount of information available analysts do not always use the same information or the same methods to analyze it Thus they may have different conclusions QUANTITATIVEFACTORSRELEVANTTODECISIONMAKINGProfitabilitythe ability to generate earnings Public is fixated on this and it is the most frequently reported single statistic published about a firm Liquiditythe ability to stay solvent they should be able to pay their bills Size and Industry Rankthe ability to exercise control within its industry Growthoverall health growth in sales assets capital etc can be expressed numerically A growing firm is usually a healthy firm Stabilitythe likelihood the firm will have the time to realize its potential QUANLITATIVEFACTORSRELEVANTTODECISIONMAKINGGovernanceBoard independence number of directors on the Board of Directors unrelated to management independence of audit committee nominating committee and compensation committee separation of Chair of Board and CEO function length of term of directors Management Competencereputation and track record of the CEO CFO and members of the Board of Directors Compensation of management is tied to performance measuresAudit Independenceare audit provided by a different firmProductIndustryis consumer demand for the product expected to increase Social Responsibilityimpact of the firm on the community environment and labour
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