finding the sources_of_finance

Jun 27th, 2015
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Academy of Art University
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Normally, such developments are financed internally, whereas capital for the acquisition of machinery may come from external sources. In this day and age of tight liquidity, many organisations have to look for short term capital in the way of overdraft or loans in order to provide a cash flow cushion. Interest rates can vary from organisation to organisation and also according to purpose.

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UNDERSTANDING FINANCIAL STATEMENTSTHE ANALYSIS OFFINANCIAL STATEMENTSFraser & OrmistonChapter 5Overview of Financial Analysis First order of business is to SPECIFYTHE OBJECTIVES OF THE ANALYSIS Focus on WHO is the financialstatement user Remember -- the identity of the userhelps define what information is neededPotential Financial StatementUsers: Creditors Investors Managers What types of questions do each ofthese users seek answers to?Creditors Why does the firm want/need to borrowfunds? What is the firms capital structure?How leveraged are they? How will they pay it back? What kind ofcash flows are being generated byoperations?Investors How has the firm performed/what arefuture expectations? How much RISK is inherent in thecapital structure? What are expected returns from thefirm? What is firms competitive position?Managers Need all info creditors and investors needPLUS: What operating areas have contributed tosuccess and which have not? What are strengths/weaknesses ofcompanys financial position? What changes are indicated to improvefuture performance?Caution!!! Keep in mind: management PREPARESfinancial statements Analyst should be alert to potential formanagement to influence reporting tomake data more appealing May want to supplement analysis withinformation apart from Annual Reportprepared by managementWhere to look for data.

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