Financial Statement- Jessica Sabrina

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.