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Файл:Сравнительный анализ финансового состояния международных нефтяных компаний. Учебное пособие
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financial markets work, the concept of market efficiency, how firms use
the financial markets, and how interest rates are determined in the
economy and the key financial statements are related to cash flows to
investors. Also they discuss about ratio analysis and other tools used to
evaluate financial statements.
Robinson, Henry, Pirie, Broihahn, and Cope (2012) help to
understand the mechanics of the accounting process; comprehend the
differences and similarities in income statements, balance sheets, and
cash flow statements; and become familiar with different financial
analysis techniques that provide valuable insight into a company's
operations, risk characteristics and valuation.
Tracy (2012) focuses how business managers should use financial
statements for better investment decisions. Interpretation and analysis of
financial statements involves identifying the users of the accounts,
examining the information, analysing and reporting in a format which
will give information for economic decision marking. He describes 17
financial ratios for financial analysis of a business. He divided ratios for
five categories: profitability ratios, liquidity ratios, leverage ratio,
efficiency ratios and market ratios. Profitability comparison helps
improve performance of businesses and investments. Liquidity testing
can to assess how comfortably a business can maintain operations.
Leverage measurement can be used to check risk. Efficiency
benchmarking helps to improve internal operations. Market-based
analysis helps to decide between alternative investments.
Bragg (2012), in this article discuss about role of financial analysis
marking, management and investment decisions. He describes the
several types of financial analysis. One is the continuing review and
reporting of standard set of measures that give management a good view
of the state of company operations. He discusses the evaluation into a
standard cash flow for which a net present value calculation can be used
to determine the discounted cash flow that is likely to be obtained. In his
article he covers the essentials of why cash inflows and outflows are the
key forces driving financial analysis and notes the wide variety of
situations in which cash flow analysis can be used, as well as how to
construct and interpret cash flow analysis models.
Fridson and Alvarez (2011), in this article they recount the basic
financial statements: balance sheet, income statement, income statement
and statement of cash flows. A corporation exists for the benefit of its
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shareholders. Its objective is not to educate the public about its financial
condition, but to maximize its shareholders’ wealth.
Strazev (2011) reputes that the financial condition characterized by
a system of indicators such as current and prospective solvency,
turnover, availability of equity and debt, the effectiveness of their use
and others essential role in achieving sustainable financial position
belongs analysis. He considers the technique of the analysis of economic
activity of the industrial enterprise: financial results and financial
position of the enterprise, the major factors providing these results.
Shows how to synthesis and evaluation of reserves identified through
analysis as well as sources of information.
Sheremet (2011) describes financial analysis of the financial
statements is used to measure company performance. It also analyses of
the income statement and balance sheet. Investors and lending
institutions will often use ratio analyses of the financial statements to
determine a company’s profitability and liquidity. If the ratios indicate
poor performance, investors may be reluctant to invest.
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CHAPTER II. THEORETICAL FRAMEWORK
This chapter includes definitions of basic concepts such as
financial analysis and its types, analysis of financial ratios, balance
sheet, profit and loss statement, cash flow statement, assets, liabilities
and etc. Besides, in this part of the thesis are explained full description
of the method of financial analysis, main sources of information and
classification including its Russian and international differences.
In the thesis the main source for the analysis are the financial
statements available for public: balance sheets and income statements.
Currently, in Russian financial accounting practice companies use
national (for the State Tax Service) and international (IFRS) accounting
principles.
International Financial Reporting Standards (IFRS) are already
used in over one hundred countries. Nowadays, Russia has been joined.
During the past three years, the largest oil company in Russia, one after
another began to move with the US GAAP to IFRS. According to the
Federal Law of 27 -XO\ ʋ-FZ "Consolidated Financial
Statements" must provide annual financial statements under IFRS in
2015 year all the credit and insurance organizations, public companies
whose securities are traded.
Methodology of financial analysis includes variety of specific
instruments like ratios, indicators and coefficients suitable for their own
purposes. The analysis also implies researching of changes over time. It
is true that financial analysis means thorough explanation of each
received result.
2.1. Financial statements
Financial analysis is a process of selecting, evaluating, and
interpreting financial data, along with other pertinent information, in
order to formulate an assessment of a company’s present and future
financial condition and performance (Clayman – Fridson – Troughton,
2012, p.347).
Financial analysis is needed to investor, lender, government,
employee, customers and suppliers. These individuals and organizations
use financial statements for different purposes and bring varying levels
of sophistication to understanding business activities. Financial
statements are official records of the financial actions of a company,
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firm or other unit over a period of time which provide a general idea of a
company or person’s financial situation in mutually short and long term.
Financial statements are the most widely used and most
comprehensive way of communicating financial information about a
business enterprise to users of the information provided on the reports.
Financial statements are used for supervision tool mainly by company
executives and investor’s in assess the overall situation and working
results of the company.
The basic output of the financial accounting process is presented in
the following interrelated general purpose financial statements:
1. A balance sheet.
The balance sheet is a financial statement that shows what the
business is worth at one point in time. Understanding balance sheet is
very important because it gives an idea of the financial strength of the
company at any given point of time. (Robinson – Van Greuning – Henry
– Broihahn, 2012, p.194).
The three important functions performed by balance sheet are: a) It
gives the summery of the firm’s assets and liabilities; (b) It is a measure
of the firm’s liquidity; (c) It is measure of the firm’s solvency.
Both terms solvency and liquidity are refer to an enterprise’s state
of financial health, but with some differences.
Liquidity of the company is the ability of the enterprise to cover its
payment obligations at their own expense (the transfer of assets in cash
money). Liquidity ratios refer to an enterprise’s ability to pay short-term
obligations. Solvency is the possibility of organizing time to pay its
debts. Solvency and liquidity are the important indicators of the stability
of firm's financial condition.
The balance sheet has two sides: assets (left side) and liabilities
and stockholder’s equity (right side). The accounting definition that
underlies the balance sheet and describes the balance is:
Assets = Liabilities + Stockholder’s equity
The balance sheet of a firm records the monetary value of the
assets owned by the firm. It is the money and other valuables belonging
to an individual or business.
The terms that are used in balance sheet are:
I. Assets. Assets are probable economic benefits obtained or
controlled by a particular entity as a result of past transactions or events.
Future economic benefits refers to the capacity of an asset to benefit the
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enterprise by being exchanged for something else of value to the
enterprise, by being used to produce something of value to the
enterprise, or by being used to settle its liabilities. The future economic
benefits of assets usually result in net cash inflows to the enterprise.
Two major types: tangible assets and intangible assets. Tangible
assets are those have a physical substance, meaning that it can actually
be seen or felt by a person, such as machinery, buildings, equipment and
real estate. Intangible assets are anything that a company owns that does
not have a physical existence, meaning things like information, patents,
trademarks, copyrights and goodwill.
Tangible assets are two types:
A) Fixed assets. This group includes land, buildings, machinery,
vehicles, furniture, tools, and certain wasting resources e.g., timberland
and minerals. It is also referred to as PPE (property, plant, and
equipment), these are purchased for continued and long-term use in
earning profit in a business.
B) Current Assets. Current assets are cash and other assets which
are reasonably expected to be converted into cash, sold, or consumed
within the normal operating cycle of the business or one year, whichever
is longer. These assets are continually turned over in the course of a
business during normal business activity. There are five major items
included into current assets:
Cash and Cash Equivalents are the most liquid asset, which
includes currency, deposit accounts, and negotiable instruments (e.g.,
money orders, cheque, bank drafts). Please modify the rest like this!
Short-term Investments
It includes securities bought and held for sale in the near future to
generate income on short-term price differences (trading securities).
Receivables
Accounts receivable amount of debt owed to the company from
customers (debtors). Receivables should show a realistic expectation of
future cash.
Inventory
The raw materials, work-in-process goods and completely finished
goods that are considered to be the portion of a business's assets that are
ready or will be ready for sale.
Prepaid Expenses
These are expenses paid in cash and recorded as assets before they
are used or consumed (a common example is insurance). The phrase net
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current assets (also called working capital) is often used and refers to the
total of current assets less the total of current liabilities.
II. Liabilities. Liabilities are probable future sacrifices of economic
benefits arising from present obligations of a particular entity to transfer
assets or provide services to other entities in the future as a result of past
transactions or events. (Fridson, Alvarez, 2011). Three essential
characteristics of an accounting liability include the following: (1) A
duty or obligation to pay exists; (2) The duty is virtually unavoidable by
a particular entity; (3) The event obligating the enterprise has occurred.
It is of two types, they are:
A) Current liabilities. These liabilities are short-term financial
obligations that are paid off within one year or one current operating
cycle. These liabilities are reasonably expected to be liquidated within a
year. Current liabilities include (1) trade accounts payable, (2) shortterm notes payable, (3) current maturities of long-term liabilities, (4)
unearned revenues (collections in advance, e.g., rent, interest, and
magazine subscription revenues), (5) accrued expenses for payrolls,
interest, taxes, and others expenses.
B) Non-current liabilities: These liabilities are reasonably expected
not to be liquidated within a year. Non-current liabilities include: (1)
long-term debt, (2) long-term bonds, (3) pensions plan obligations.
III. Equity. Equity is the residual interest in the assets of an entity
that remains after deducting its liabilities. In a business enterprise, the
equity or capital is the ownership interest. In accounting for
stockholders’ equity, the basic accounting purposes are the following:
(1) to identify the source of corporate capital; (2) to identify legal
capital; (3) to indicate the dividends that could be distributed to the
stockholders. Equity can be of: share capital, retained earnings,
shareholder’s equity.
2. The income statement (or profit and loss statement) presents the
results of operations for a reporting period. The income statement
provides information concerning return on investment, financial
flexibility, and operating capabilities. Return on investment is a measure
of a firm’s overall performance. Risk is the uncertainty associated with
the future of the enterprise. Financial flexibility is the firm’s ability to
adapt to problems and opportunities. Operating capability relates to the
firm’s ability to maintain a given level of operations. The accounting
definition of income is:
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Revenue – Expenses = Income
The income statement usually includes several sections:
Revenues is the total amount of money received by the company
for goods sold or services provided during a certain time period.
Sometimes companies will break down revenues according to business
sector or geographic region (local and export markets), but usually there
will just be one number. Some companies, especially retailers and
manufacturers, use the term sales instead of revenues, but it’s the same
idea.
Expenses is the amount of money spent or cost incurred in an
entity's efforts to generate revenue. Expenses represent the cost of doing
business where doing business is the sum total of the activities directed
towards making a profit.
Cost of Sales: This number includes expenses directly associated with
creating revenue, such as labor and materials.
Operating Expenses: This number includes activities such as
marketing, research and development, and administration. It usually also
includes depreciation expenses and any special non-recurring charges.
Interest Expenses: This figure includes all the interest the
company paid out on its bonds (if any) and/or long-term debt.
Taxes: The amount of money paid in taxes by the firm.
Extraordinary Expenses: This figure shows any unusual or one-
time charges that the firm must pay (e.g. a lawsuit settlement).
Profit: The profit section of the income report is the part to
which investors pay the most attention. It shows whether the company
made money or lost money. It usually includes these specific sections:
Net Income: This is the company’s bottom-line profit after all
expenses and revenues have been accounted for. If this number is
positive, then the company turned a profit for the period. If it’s negative,
then the company suffered a loss.
3. A statement of cash flows. It summarizes the cash effect of an
enterprise’s operating, financing, and investing activities over a given
period of time.
Investing Activities include the results of the purchase or sale of
debt and equity securities of other entities and fixed assets. Cash inflows
from investing activities are comprised of (1) receipts from sales of
equity and debt securities of other companies and (2) amounts received
from the sale of fixed assets. Cash outflows for investing activities
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include (1) payments to buy equity or debt securities of other companies
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b
b
and (2) payments to buy fixed assets.
Financing activities include the issuance of stock and the
reacquisition of previously issued shares (treasury stock), as well as the
payment of dividends to stockholders. Also included are debt financing
and repayment. Cash inflows from financing activities are comprised of
funds received from the sale of stock and the incurrence of debt. Cash
outflows for financing activities include (1) repaying debt, (2)
repurchasing of stock, and (3) issuing dividend payments.
Operating activities are connected to the manufacture and sale of
goods or the rendering of services. Cash inflows from operating
activities include (1) cash sales or collections on receivable arising from
the initial sale of merchandise or rendering of service and (2) cash
receipts from debt securities (e.g., interest income) or equity securities
(e.g., dividend income) of other entities. Cash outflows for operating
activities include (1) cash paid for raw material or merchandise intended
for resale, (2) payments on accounts payable arising from the initial
purchase of goods, (3) payments to suppliers of operating expense items
(e.g., office supplies, advertising, insurance), and (4) wages.
Understanding the nature of activities helps the analyst understand
where the company is doing well and where it is not doing so well.
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FDVKÀRZFRPHIURPLWVRSHUDWLQJDFWivities.
Figure 1 shows an outline of the statement of cash flows.
CASH IN & OUT FLOWS
Beginning Cash
and Cash
Equivalent
balance
Operating
iii
Changes in Cash and Cash Equivalents for the Period
Investing
iii
Financing
iii
Ending Cash
and Cash
Equivalent
balance
Figure 1. Outline of the statement of cash flows
(Shim J., Siegel, Shim A. 2011, p.49)
Annual accounting (financial) statements in Russia consist of the
balance sheet, income statement and its annexes. The Russian public
companies since 2013 are obliged to provide the reporting under the
18
International Financial Reporting Standards (IFRS). And since 2015 all
organizations should keep the reporting according to the international
standards. (The federal law "About the consolidated financial
statements" of 27.07.2010 No. 208-FZ).
International practice of accounting is inhomogeneous and manysided. Foremost, distinguish national standards and international
standards. The national standards of accounting are developed by every
country independently. Leading countries in area of national standards
of account are the USA and Great Britain, that determined by the role of
these countries on international financial markets.
Among the international standards of accounting are the most
widespread IFRS and GAAP.
In a table 1 are presented likenesses and distinctions of US GAAP
and IFRS.
As compared IFRS and US GAAP have both pluses and minuses.
From one side, to the accounting compilers can be more comfortable to
use the standards of US GAAP gone into detail, prescribing every step.
On the other hand, near to excessive detail, absence of clear structure,
difficult hierarchy of the American standards complicate the use by
them. In 2002 it was signed Norvolokskoe agreement according to that
efforts united for the removal of basic differences of IFRS and US
GAAP. As researches show, distinctions between standards remain less.
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Table 1. - Likenesses and distinctions of US GAAP and IFRS (Diffen
(2014): About us, www.diffen.com. Downloaded: April 29, 2014)
Comparison chart
Used in United States
Performance
elements
Required documents
in financial
statements
Inventory Estimates
Inventory Reversal Prohibited Permitted under certain criteria
(Generally Accepted Accounting
Revenue or expenses, assets or
liabilities, gains, losses,
comprehensive income
Balance sheet, income statement,
statement of comprehensive income,
changes in equity, cash flow
statement, footnotes
Last-in, first-out, first-in, first-out or
weighted-average cost
GAAP
(International Financial
Principles)
Over 113 countries, including
those in the European Union
Revenue or expenses, assets or
liabilities
Balance sheet, income
statement, changes in equity,
cash flow statement, footnotes
First-in, first-out or weightedaverage cost
IFRS
Reporting Standards)
Purpose of the
framework
Objectives of
financial statements
Underlying
assumptions
Qualitative
characteristics
Definition of an asset
US GAAP (or FASB) framework has
no provision that expressly requires
management to consider the
framework in the absence of a
standard or interpretation for an
issue.
In general, broad focus to provide
relevant info to a wide range of
stakeholders. GAAP provides
separate objectives for business and
non-business entities.
The "going concern" assumption is
not well-developed in the US GAAP
framework.
Relevance, reliability, comparability
and understandability. GAAP
establishes a hierarchy of these
characteristics. Relevance and
reliability are primary qualities.
Comparability is secondary.
Understandability is treated as a userspecific quality.
The US GAAP framework defines an
asset as a future economic benefit.
Under IFRS, company
management is expressly
required to consider the
framework if there is no
standard or interpretation for an
issue.
In general, broad focus to
provide relevant info to a wide
range of stakeholders. IFRS
provides the same set of
objectives for business and nonbusiness entities.
IFRS gives prominence to
underlying assumptions such as
accrual and going concern.
Relevance, reliability,
comparability and
understandability. The IASB
framework (IFRS) states that its
decision cannot be based upon
specific circumstances of
individual users.
The IFRS framework defines an
asset as a resource from which
future economic benefit will
flow to the company.
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