Analysis of Financial Statements Report

Running head: ANALYSIS OF FINANCIAL STATEMENTS
ANALYSIS OF FINANCIAL STATEMENTS
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1ANALYSIS OF FINANCIAL STATEMENTS
Financial Analysis
The financial analysis is some of the key and important concepts that plays an
important role when analysing or examining an company and the same has been well done in
the Chapter 4. Analysing the company based on its historical performance can be well done
with the help of Ratio analysis which is an key important and quatitative tool that well helps
analyse the financial performance and position of the company over a series of time period.
The historical performance goes to show not only the financial performance but the initiative
or effort the management of a company in well expanding the business activities.
Discounted cash flow and economic profit are significant ways that are used by
investors for identifying the value of the firm. Lenders or investors evaluate the financial
statement before heading towards making any investment decision. The capital market is
quite different where the investors are trading in equities, and to make profits, extensive
research is required relating to various policies that exist in the equity investment markets. I
have analyzed that the article has given the example of Sydney's fish market, where it is said
that in a fish market, one can get an immediate result after investing the money, and in my
opinion, in the fish market, we are trading in monetary terms. Whereas, there is an exception
in the equity market where based on some assumptions and past scenarios, investors trade in
the equity market. However, the investor can only except that the investment will be
profitable for them, but they cannot ensure that the capital market will work on their behalf. I
have understood that before making any investment decision, it is profitable to look into the
financial statements of the particular company in which one is interested in making any
investment. In my view, the author is trying to say that all the operating and financing
activities of the firm must be critically evaluated before any investment decision. It is well
said that to foresee the future, one must first look into the past. I have assessed that to obtain
a better idea about the cash flows and the economic profit of the business; one must try to

2ANALYSIS OF FINANCIAL STATEMENTS
separate the financial activities from the accounting actives thus, getting adequate and clear
ideas about the functioning of the company. Analyzing the residual earnings is one of the
specific measures that the investors do to get an idea about the retained earnings of the firm
that is being left after paying all the liabilities. Abnormal profits include return on equity, the
required rate of return, and a book value of equity of ordinary shareholders.
I have analyzed the financial statement of Ryman Healthcare for better understanding
all the financial matters before making an equity investment decision. From the article, I have
understood that financial leverage is the relationship between the net financial obligations and
the equity that is often addressed as the firm's gearing ratio. For a better understanding of the
operating activities, one must measure the working spread. The difference between a net
operating asset and the net borrowing cost is referred to as the operating spread of a firm. It is
always expected to have a high operating spread to gain more profitability for the business. I
have measured that Ryman healthcare has an impressive operating spread of 13.1%, and it
will help the firm to show a better profitability position in the market. By efficiently
evaluating the return on equity, one can identify the leverage, profitability, and efficiency
position of the firm in the existing market situation. In my opinion, analyzing the leverage
ratios are extremely important for all investors as well as organizations. All organizations
need to have a clear view of all leverage information in their financial statements as it will
give an idea to investors or lenders regarding making any investment decision. Return on
equity has three aspects of analysis, such as leverage, profitability, and efficiency. I have
analyzed that leverage is often considered as debt that is undertaken by a firm to fund its
operating assets. More is the debt of a firm. More is leverage. Even I can think in this way
that a particular firm is focusing more on debt financing instead of equity financing. I can
assume that by depending on debt financing, the firm wants to undertake less risk as in the
capitalization market, it is often seen that debt financing is less risky than equity financing. I

3ANALYSIS OF FINANCIAL STATEMENTS
have evaluated that Ryman has a high occupancy level for the existing retirement village unit.
Due to strong development margins and growth in residential property, value there is an
upward revaluation of the features of Ryman. Healthcare provides excellent services and has
innovative marketing strategies due to which it can maintain impressive goodwill in the
market.
Lastly, I can conclude that for making an efficient assessment of the investment
decision, the financial and operating activities of the firm must be critically analyzed. It is
important to know about the economic realities of the firm, thus having clarity about all the
financial and operational activities of the business. I have understood that an investor would
be interested to know the earnings and book value of the shareholder's equity. Investors will
measure the abnormal profits to obtain a clear view of the financial statement based on which
investment decision will be made. Lastly, I can say that before making any equity investment,
the value of the firm must be analyzed efficiently, thus leading to profitable outcomes.