how to do financial_research

May 28th, 2015
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Aberystwyth University
Course: financial_research
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Statement of Comprehensive Income: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profit.

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FINANCIAL ANALYSIS OF BUSINESS STATEMENTSThe process of examining various financial statement items with the objective of performance, and perhaps more importantly, projecting future performance and financial condition.BROAD CATEGORIES OF RISKGeneral Economic RiskFinancial Price Risk Liquidity Risk (Operational and Agency implications)Long-Term Solvency Risk/Risk of Financial DistressFinancial Structure RiskAgency Risk (per the Incentives of Management)Operational Risk/Execution RiskSales Risk (Acquiring and Retaining Clients)Credit Risk/Receivables Risk/CollateralizationBrand/Marketing RiskTechnological Obsolescence RiskIndividual Project Risk (And Opportunity Risk)DIMENSIONS OF RISKHistorical trendsVariabilityComparable benchmarking Lifecycle stageIndustryPeer firmsOPERATING EFFICIENCY3 key areas of operating efficiency:A/R (A/R days should not go up <-- reduction of operating cash flows, pejorative implications for operating margin, increased probability of a write down)Inventory (Inventory Days should not go up <-- financing inventory with higher cash outflows and increased probability of a write down)A/P (decrease --> higher cash outflows)CRITICAL QUESTIONSHas the firm made a change in its product, geographic, or customer mix that would affect the comparability of the ratios over time?Has the firm made a major acquisition or divestiture?Has the firm changed its methods of accounting over time?COMMON SIZE AND TREND FINANCIAL STAT

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