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ACC501 GDB 2 Solution Fall 2012

Learning Objective:

This discussion question will enable the students understand the implication of the concepts related to “Financial Statement Analysis and its related Techniques”.

Discussion Question:

Ali is the newly hired CEO of Alpha Manufacturing Company (AMC) and he wants to check the overall financial performance of AMC during the year. He asked Osman – the finance manager, to prepare a fresh analysis of the current year financial statements.

Osman came up with large number of reports containing ratio analysis, time series analysis, peer analysis, vertical and horizontal analysis, Du-Pont Analysis, industry analysis etc. Ali checked these reports but he did not have enough time to deeply analyze the reports. So, he again directed Osman to make a brief and to the point analysis showing the AMC’s major aspects of overall performance for the current financial year.

Now, Osman is in a confusion that which analysis he should use that represent comprehensive information about the company current financial performance. Being a Finance student, discuss which type of specific analysis Osman should perform to find out the major aspects of financial performance of the company? Support your answer with conceptual rationale. 

 Solution:

i think ali want to see only annually financial statement which describe the position of the AMC. because Ali did not have enough time to see single reports like ratio analysis. Osman confused him in financial analysis by representing all reports. I think he don’t know which financial statement is best describe the position of an organization. income statement or balance sheet these statemnts are describe the performance of a compnay.

Another Solution:

Osman should use balance sheet analysis because Ali wanna know over all performance of the firm.As the balance sheet give a bird’s eyes view of the company from the beginning. while P&L a/c and income statement gives day to day and year’s performance respectively. a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a “snapshot of a company’s financial condition”. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business’ calendar year.

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