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Financial Statement Analysis
A. Financial Statement
Financial statement is the documents that provide information about the financial situation of a company that describes the investment activities, financing, and operations company.
That exist in financial statement are:
· Balance Sheet is summarizes the assets, liabilities, and owners’ equity of a company at the end of a year;
· Income Statement is summarizes the revenues and expenses of the firm at the end of a year;
· Statement Of Changes In Equity to show the changes accounts of equity
· Statement Of Cash Flow to show cash inflow and cash outflow that separate based on operating , investing, and financing;
· Notes to financial statement(CALK)to explanation of information that include the part which is important from financial statement .
B. Financial Statement Analysis
Financial Statement Analysis is the process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making.
Technique for financial statement analysis are:
· Horizontal analysis
· Cross-section analysis
· Common-size analysis/vertical analysis
· Financial analysis ratio
· Discuss and management analysis
Scope of financial statement analysis
· Liquidity Analysis;
· Solvency Analysis;
· Profitability Analysis;
· Cash Flow Analysis;
· Banckruptcy Prediction Analysis;
· Risk Analysis;
· Investment Analysis.
C. Bankcruptcy Prediction Analysis
This analysis have two model to analize and there are:
a. Univariate Model
b. Multivariate Model (such as Z-score and Logit Analysis)
Logit analysis model developed by James A. Ohlson of research results using the 9 best ratio.And James ohlson used to regretion liner double approach :
And 9 ratio to supported his formula Y are;
1. Natural log of total assets to GNP implicit price deflator indeks = SIZE (X1)
2. Total Liabilities to Total Assets = TLTA(X2)
3. Current Assets-Current Liabilities to Total Assets = WCTA(X3)
4. Current Liabilities to Current Assets = CLCA(X4)
5. Net Income to Total Assets = NITA(X5)
6. Funds from Operations to Total Liabilities = FUTL(X6)
7. Dummy variable, get value is one if net income was negative for the last two years and zero otherwise = INTWO(X7)
8. Dummy variable,get value is one if total liabilities exceed total asset and zero otherwise = OENEG(X8)
9. Net profit t-net profit t-1)/(|net profit t| + |net profit t-1|) = CHIN(X9)
James a Ohlson develope the logit analysis model that found 9 variabel like this :
Y = - 1,32 – 0,407(SIZE) + 6,03(TLTA)- 1,43 (WCTA) + 0,0757(CLCA) – 2,37(NITA) – 1,83(FUTL) +0,285(INTWO) – 1,72(OENEG)-0,521(CHIN)
After get the Y value, we put into the Probability of Bankcruptcy formula and there formula is:
Probability 0f bankruptcy(P) = 1
e = (2,718282) the logaritma number
Y= multivariate function that include constanta and coefisien from collection of explanatory variable.
And for the evaluation of criteria the company will bankcrupt with Cut off point = 3,8%,
· If (P) bigger than 3,8% it means the company have a probability of bankcruptcy
· If (P) less or equal than 3,8% it means the probability of bankcruptcy is small.
To know how actually the probability of bankcruptcy from a company, so we can use the analysis logit model where the formula probability of bankcruptcy (P) of the company bigger than 3,8% it means if the company have a probability of bankcruptcy. And if (P) less than or equal than 3,8% it means the probability of bankcruptcy is small.