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12 Cards in this Set
- Front
- Back
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What is financial analysis?
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It is the interpretation of financial data into useful information that can facilitate decision-making.
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What are the major groups who are interested in the analysis of a company's financial health?
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1) Shareholders/Investors
2) Board of Directors & Management 3) Creditors 4)Governmental Regulatory Bodies 5) Suppliers 6) Customers |
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Why are shareholders and Board of Directors interested in the analysis of a company's financial health?
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1) to evaluate overall performance
2) to identify opportunity areas 3) to address financial weaknesses 4) to formulate strategies 5) to implement action plans for the future to insure successful business operations |
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Why are creditors interested in the analysis of a company's financial health?
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They need information about the profitability and stability of a company to determine if they will extend credit and under what terms and conditions.
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Why are investors interested in the analysis of a company's financial health?
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They need to assure themselves that their investments are safe and profitable.
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Why are Governmental Regulatory Bodies interested in the analysis of a company's financial health?
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They aim to protect the community as a whole by insuring that companies disclose reliable and valid financial information.
Licensed Public Accountants and Auditors are tasked to examine the financial condition of public companies to certify that prescribed standards have been met. |
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Why are suppliers (among them - Insurance Companies) interested in the analysis of a company's financial health?
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They need information about a company's past financial performance to conduct a thorough assessment of a client's potential risks.
This will help the insurer to develop policy premiums and provisions that match the customers risk exposure. |
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What are the four financial measures, useful to insurance professionals?
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1) Valuation
2) Profitability 3) Effectiveness/efficiency 4) Financial Strength/Solvency |
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What is Valuation?
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It determines how much a business is worth.
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What is profitability?
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It measures the amount of money a company has earned over a certain period.
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What is Effectiveness/Efficiency?
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It measures how well the company's resources are being used and managed.
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What is Financial Strength/Solvency?
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These measures provide an indication of the company's ability to pay it's short and long-term obligations and accomplish future expansion and growth.
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