FINANCIAL STATEMENT ANALYSIS

FINANCIAL STATEMENT ANALYSIS

1. Share Holders Equity

   • Capital Stock
     • Includes an explanation of changes in the number of capital sources. Increases/decreases.
     • Alert us from potential increase in shares.
   • Retained Earning
     • Accumulation of undistributed earnings, primary source of dividen distribution to shareholders
   • Spin-Offs and Split-Offs
     • Spin-Off, distribution of subsidiary stock to shareholders as a dividend
     • Split-Off, exchange of subsidiary stock owned by the company for shares in the company owned by the shareholders

2. Cash Flows

   • Provide information on cash inflows and outflows for a period. Separated in operating, investing and financing activities.
     • Operating, earning-related activities of the company.
     • Investing, means of acquiring and disposing of noncash assets, expected to generate income for the company.
     • Financing, means of contributing, withdrawing and servicing funds to support business activites.
   • There are two acceptable methods.
     • Direct Method
       • Adjust each income item for its related accruals and arguably provides a better format to asses the amount of operating cash inflows.
     • Indirect Method
       • Net income is adjusted for non cash income items and accruals to yield cash flows from operations.

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