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Easy ways to do Finance and Ratio Analysis:

Finance papers are interesting and can easily be dealt with. One of the biggest problem is the fear factor that comes to some minds when they hear of Financial Management Subject. However, it is indeed one of the easiest paper to deal with. One has to only understand few concepts like categorizing of costs and items as to which belongs to a long run and which belongs to short run. Similarly, we need to understand which is directly related to saes and which are not. One more aspect is operational and non operational cost. Anything that directly relates to the main line of business is operational. For example, if a company dealing with selling mobile phones is selling a company owned car, it is non operational as the company is not doing the business of selling cars.

Similarly any transaction that involves direct movement of money forms a part of cash flow statement. Hence an item like depreciation does not involve any movement of cash and hence is not a part of cash flow statement. Once the segregation is understood, it becomes very easy to categorize data and to understand why a particular item is in balance sheet and why the other is in income statement. All that is now required is to find the formulas of the ratios and use the formula with the data understood as above to interpret the results. For the data, one can use company’s annual report of some online websites. Hopefully this will be helpful for you to guide you towards doing a better assignment on financial management.

Further to the above, some interpretation depends on the industry trends as well as ideal ratio. Such information is also easily available both on books as well as on internet.

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