Final Financial Statement Analysis

Financial Statement Analysis

     A.    Definition Of Financial Statement Analysis

Financial Statement Analysis consists of two words Analysis and Financial Statements. To explain the meaning of the word, then we can explain the meaning of each word. Word analysis is to solve or explain something the smallest units into different units. While financial statements are the Balance Sheet, Profit / Loss and Cash Flow. If the two are combined then the understanding of financial statements analysis means:
Financial statement analysis is elaborate post - post financial statement information into smaller units and see the relationship that is significant or that have meaning with each other between the quantitative data and non-quantitative in order to determine the financial condition more in a very important in the process of generating the right decision.

     B.     Purpose Of  Financial Statement Analysis

The purpose of financial statement analysis can be stated as follows:

1.      To provide a broader, deeper than those usually found in the financial statements.

2.       To multiply the information is not visible by naked eye (explicit) of a financial statement or report financial behind the (implicit)

3.       Be aware of the errors contained in the financial statements.

4.       To unload the things that are consistent with respect to any financial statements or related to the information obtained from outside the company.

5.       Knowing the properties of the field to end the relationship and increase prediction.

6.      Able to determine the ranking (rating) based on certain criteria that the company has been known in the business world.

7.      To compare the situation of the company with other companies with previous periods or with normal industry standard or ideal standard.

Steps taken in the financial analysis are:

1.      Financial statements and collect necessary data as complete as possible.

2.      Taking measurements or calculations with certain formulas.

3.       To interpret the results of calculation and measurement.

4.       Create reports about company's financial position.

5.      Provide recommendations required in connection with the analysis.

     C.     The Methods Of  Financial Statements Analysis

The analytical method used in analyzing financial statements:
1. Horizontal analysis
Horizontal analysis is conducted comparative analysis of financial statements for a period or a moment, so you will know its development. This method is also called dynamic method. Are included in this method is:

a.      Financial ratio analysis. This technique is used in comparison with the financial statements at least 2 periods or more, with the show:
• Data absolute or amount in dollars.
• An increase or decrease in the amount of dollars
• an increase or decrease in the percentage of
• Comparison of the ratio.

b.      Trend analysis (trend analysis). This analysis is used to determine the tendency of the finance company. Is the tendency to rise, fall or remain? And this analysis is expressed in a percentage.

c.        Analysis of sources and uses of working capital. Is an analysis to determine the sources and uses of working capital as well as the causes of changes in the given period.

d.       Analysis of sources and uses of cash. An analysis used to determine the causes of changes in cash following sources of cash.

e.       Analysis of changes in gross profit. An analysis used to determine the causes of change in gross profit is realistic and budget (budget) of the report.

2. Vertical analysis
Vertical analysis is an analysis that compares the post that one post to another in the financial statements. The report analyzed only covers one period only, so only you will know the financial condition or results of operations at that time only. This method is also called a static method. Are included in this method is:

a.       Component analysis (common size analysis). The analysis technique used to determine the percentage of their investment assets. capital structure, financing and funding composition and its relation to the sale.

b.       Ratio analysis. Is an engineering analysis to determine the relationship of certain items of the financial statements and their combinations

c.       Analysis of Main Round (Break Even Point Analysis). An analytical technique used to determine the level of sales that must be achieved in order not to suffer losses.

     D.    Times Interest Earned Ratio

Times interest earned (also called interest coverage ratio) is the ratio of earnings before interest and tax (EBIT) of a business to its interest expense during a given period. It is a solvency ratio measuring the ability of a business to pay off its debts, if the value of the company higher, it will be better to the company meets the bond interest.

Formula:

Times interest earned ratio is calculated as follows:/.;’

Both figures in the above formula can be obtained from the income statement of a company. Earning before interest and tax (EBIT) is same as operating income.

    E.    Financial Statement

Times Interest Earned Ratio PT. Prashida Aneka Niaga:

Year	Earnings before interest and tax	Interest expense
2010	30.562.490.441	4.344.808.162
2009	35.267.450.502	6.189.861.142

 

   F.     Conclusion

To measure the ability of the company's operations in providing long-term protection to creditors in particular in paying interest can use the time interest earned. Income deemed sufficient to protect creditors when this ratio is the amount of 2 times or more.

Based on the above calculation, it can be concluded that the company's ability to repay long-term debt is still well.