Jessica Sabrina
3AD3/ 361 10 012
FINANCIAL STATEMENT ANALYSIS
DEPT TO EQUITY
A.
DEFINITION OF FINANCIAL STATEMENT ANALYSIS
Digging
More information Conception A financial report.
1. Screening.
Analysis was conducted in order to determine the situation and condition of the
company's financial statements without going directly to the field.
2. Understanding.
Understanding corporate, financial condition and results of operations.
3. Forecasting.
Analysis is used to forecast the company’s financial condition in the future.
4. Diagnosis.
Analysis is intended to look at the possibility of that happening problem.
5. Evaluating.
Analysis performed to assess the performance of management in managing the
company.
B.
THE IMPORTANT of FINANCIAL STATEMENT ANALYSIS
Effectiveness
financial statement analysis, need 5 steps / stages:
1.
Identify the economic characteristic of the industry in which a particular firm
participates
—
Large number selling
similar product
—
Does technologies
change play an important role in mantaining a competitive advantage
—
Are industri sales
growing rapidly or slowly
2.
Identify the strategies that a particular firm pursues to gain a competitive
advantage
— Are
its products designed to meet the need of specific market
— Has
the firm integrated backward into the growing or manufacture of raw material
for its product
— Has
the firm integrated forward into retailing to final costumer
3.
Asses the quality of a firm’s financial statement
— Do
earning include nonrecurring gains and losses
— Do
earning include revenue that appear to be mismatched with the business model
4.
Forecast the expected future profitability and risk using info Financial
Statement
— Most
financial analyst asses the profitability of a firm relative to the risk
involved
— Assessment
of the recent profitability provide the basis for projecting
— Forecast
of a firm ability to manage risk
— Estimate
financial difficulties in the future
5.
Value the firm
— Financial
analyst make recommendation to buy, sell, or hold the equity securities of
various firm
C.
ANALYSIS TOOLS CAPITAL STRUCTURE
In
an analysis of the capital structure, there are several analytical tools, such
as:
1. Financial
leverage ratio (financial leverage) ratio shows how much the assets owned by
the company financed from equity.
2. The
ratio of total debt to total capital (total debt to total capital ratio) or
commonly called the ratio of total debt (total debt ratio) shows the
composition of the debt financing with the rest of the funding.
3. Total
debt to equity ratio (total debt to equity capital ratio) shows the composition
of the debt with equity funding. The difference between the ratio of total debt
to equity (rthe) with the ratio of total debt to total capital (RTHTM) is the
only credible rthe equity financing, while at RTHTM that counts is the whole
non-equity funding, including funding, such as the rights of minorities.
4. The
ratio of long-term debt to equity ratio (long-term debt to equity capital
ratio) shows the composition of long-term debt financing to equity financing.
5. The
ratio of short-term debt to total debt (short-term debt to total debt ratio)
shows the composition of debt funding.
D.
FORMULA OF DEBT TO EQUITY
Total
debt to equity
|
Year
|
Total Liabilities
(Milion)
|
Total Equity (Milion)
|
Debt to Equity
|
|
2008
|
11.644.916
|
11.131.607
|
1,05
|
|
2009
|
10.453.748
|
13.843.710
|
0,76
|
As
an illustration used financial data of PT
United Tractors Tbk and Subsidiaries.
Based
on the above table shows that in 2008, the composition of debt and equity of PT
United Tractors Tbk and its subsidiaries is 1.05. This shows that every Rp 1,00
equity versus Rp1.05 liability means that there is a margin of safety by -5%.
And in 2009, the composition of debt and equity of PT United Tractors Tbk and
its subsidiaries is 0.76. This shows that every Rp1,00 equity versus Rp 0.76 liability
means there is still a margin of safety of 24%. So when the company went into
liquidation, there is still excess equity over debt that must be covered.
E. CONCLUSION
Results
of these calculations indicate that in 2008, the company was likely not
solvable because debt financing is greater than equity financing. While in
2009, the company is likely solvable because less debt financing than equity
financing.
