Question

) What would a banker be concerned about before giving a loan to a company?

2) What would be a concern to a potential investor in a company?

3) What is a 10K?

4) What is horizontal analysis?, vertical analysis?

5) What is one type "ratio analysis" and describe what it measures in a company.

Answer 1

1. Bank generally consider followings  before giving loan :

1. Credit history
2. Cash flow history and projections for the business
3. Collateral available to secure the loan
4. Trustworthy management
5. Reputation Among Public about the entity
6. Auditor's Report.
7. Solvancy & Liquidity.
8. Valuation on its Assets

2. On following point are considered by investors before making any investment:

i) investors get excited about the words “new and innovative.” The bottom line is that if the market is saturated with hundreds of identical products, then your company isn’t likely to be a huge hit.

ii) Entry and Exit point. It is very important for a investor to know when he /she should exit from the business. it must be in the agreement as an clause. Most of time investors exit when company issues Public offer i.e IPO

III) Rate of return and Dividend policy of the organisation

  Iv) Management and its trustworthiness

3. A Form 10-K is essentially a document that the government requires management to prepare for you, a potential investor (or owner of the company's shares), explaining the company's finances, risks, opportunities, and current operations.

4.

Horizontal analysis (also known as trend analysis) is a financial statement analysis technique that shows changes in the amounts of corresponding financial statement items over a period of time. It is a useful tool to evaluate the trend situations. The statements for two or more periods are used in horizontal analysis..It greatly helps us to evaluate the changes between two diff time in the Financial Statement. Now a days most of the company prepare horizontal balance sheet.

Vertical analysis is a method of financial statement analysis in which each line item is listed as a percentage of a base figure within the statement. Thus, items on an income statement can be stated as a percentage of gross sales, while line items on a balance sheet can be stated as a percentage of total assets or liabilities, and vertical analysis of a cash flow statement shows each cash inflow or outflow as a percentage of the total cash inflows.It is a part of ration analysis also.

5. There are 4 types of ratio, these are :

Liquidity Ratios: First among types of financial ratios is liquidity ratio. it used to judge the paying capacity of a business towards its short-term liabilities. It helps with the evaluation of a company’s ability to satisfy its short-term commitments.Example Current Ration, Quick Ratio.

Solvency Ratios:second  accounting ratios is solvency ratios. it helps to determine a company’s long-term solvency. It is often used to judge the long-term debt paying capacity of a business. Example Debt Equity Ratio, Fixed Assets Ratio.

Activity Ratios:Activity ratios are also known as performance ratios, efficiency ratios & turnover ratios. They are basically show the operating performance. Example Stock turnover ratio, Working capital turnover ratio etc.

Profitability Ratios: Basically shows the earning capacity of the company. Example Gross Profit Margin, Net Profit Margin etc