What is a Ratio?A ratio, in simple terms, expresses a relationship between two or more things. Ratio is an indicated quotient of two mathematical terms that shows a relationship and expresses a fact.In the case of financial analysis, a ratio is used as a benchmark to estimate the financial position or to look at the financial position of the firm. It is to be noted that to form a ratio, at least two mathematical expressions are required. A single value, by its nature of individuality, cannot express a ration on its own.What is a Financial Ratio?The absolute accounting figures mentioned ... Read More

What is Meant by Financial Analysis?Financial analysis is a method of finding the strengths and competencies of a firm by establishing relationships between the items on the balance sheet and the profit and loss account. It is very essential for firms to succeed by focusing on needful financial points and revitalizing their financial strength. Financial analysis can be done by any stakeholder of the company and they differ in terms of content which is used by the stakeholder according to his/her own needs.Who Uses Financial Analysis?Financial analysis can be used by different groups of people for a variety of reasons. ... Read More

Apart from having excellent analytical value, the statement of changes in the financial position helps stakeholders understand numerous other aspects of a business. It offers insights into the working capital and cash inflow position of a company. As the statement includes funding details of the past, it helps analysts in understand the financial and investment policies followed by the company in the past. It also shows the non-current assets that have been acquired by the firm and the resources that have been used for doing so.Furthermore, it also helps a company in realizing the basics in the following areas −LiquidityThe ... Read More

In broader terms, the sources of cash flow include the following −Profitable operations of a firmDecrease in assets except cashProceeds from sale of ordinary shares or preference share issueIncrease in liabilities (including bonds and debentures)Uses of Cash FlowFollowing are some of the uses of Cash Flow −Loss arising from operationsIncrease in assets except cashDecrease in liabilities including the redemption of bonds and debenturesCash dividendsRedemptions of redeemable preference sharesThe statement of changes in cash position is found easily by recording inflows and outflows of cash. The net cash increase is the cash position at the end of a period minus the ... Read More

Although a lot of people consider cash flow statement and funds flow statement to be the same; however, they are different in many aspects. Right from their popularity to their use, they have differences in many forms.Following are the major differences that separate cash flow and funds flow statements −Reporting Financial HealthThe cash flow statements and the funds flow statements report different aspects of the financial health of a company. The cash flow statement is more into cash. It shows the inflow and outflows of cash within a certain time period. This is mainly to show the cash or cash equivalents ... Read More

Sources of FundsThere are some notable sources of funds or working capital for firms in their financial statements. These sources are as mentioned below −Funds from OperationsThe most important source of funds for a firm is its profit from operations. As all companies work to gain as much profit as possible, it is easy to realize why funds gained from operations are so popular in nature. The major source of information of profits for a firm is the profit and loss account. However, the profit and loss account may contain some sources that do not affect the working capital. So, ... Read More

The working capital flow occurs when there is a net increase or decrease in working capital due to a transaction. There are some transactions involved in a firm’s projects that change working capital. Whereas, there are other transactions that have no net effect on the working capital.Usually, items from profit and loss accounts and business events that affect current and non-current accounts simultaneously effect the net working capital flow of a company. There are also current-only and non-current-only accounts the changes in which do not affect the net-working capital flow.Increase and Decrease in Working CapitalFollowing are some examples to understand ... Read More

Duration of FundsThe main difference between closed-ended and open-ended mutual funds is that the closed-ended funds are for a specific duration, while the open-ended funds have no specific duration.The investors in open-ended funds may join and leave the funds anytime they wish.In case of closed-ended funds, the investors must stay invested for a specific duration pre-set by the fund managers.Number of Outstanding SharesIn case of closed-ended funds, there is a fixed number of shares outstanding which are traded in the market. The markets may include the share markets or OTC (Over the Counter) markets. The price of the shares is ... Read More

There are many similarities between bonus shares and share splits.In both the cases, the total number of outstanding shares goes up.Share split and bonus shares both increase the good future outlook of the shares.A company issuing a bonus share or splitting its shares shows a kind of promise to the shareholders that the future of the company is healthy and there would be no issues with profitability in the future.However, there are differences in the way the bonus shares and the share splits are treated in accounting.In case of bonus shares, the reserves and surplus capital goes down due to ... Read More

We know that a company can raise funds from the capital markets by issuing shares to a number of shareholders. When a company offers the opportunity of investment to a select group of investors, it is known as private placement.Private placement is an alternative to an Initial Public Offering (IPO) for a company seeking to raise capital. In a private placement, the number of investment participants is limited to less than 50.Private placement is a popular way to resource funding by the companies in India. Let's check why companies prefer private placement as a source of funding.Less Stress of ComplianceThere ... Read More