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Financial Analytics


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Financial Analytics

  1. 1. Crowd funding is the new way forward Grants and Loans the Traditional Way Alternate Forms of Financing The Bank of Family and Friends The power of Angel Investors
  2. 2. Introduction Financial health is one of the best indicators of your business's potential for long-term growth.
  3. 3. Introduction Every company wishes to have a strong financial foundation, which eventually becomes the company’s core strength. Financial teams work hard to keep their data safe and structured so that they can make educated and accurate business choices using analytics. These financial analytics not only aid in the creation of a clear image of their firm now, but also pave the way for future forecasts, budgets, and roadmaps.
  4. 4. Definition Financial analytics is a field that gives different views of a company’s financial data. It helps to gain in-depth knowledge and take action against it to improve the performance of your business. Financial analytics has an effect on all parts of your business.
  5. 5. Why Financial Analytics is important? Timely information - Decisions in business Sound financial planning & forecasting New business model, Traditional financial department - financial analytics. Shaping up tomorrow’s__________. To improve the __________strategies of your business. Focuses - tangible assets deeper insight - financial status
  6. 6. Need for Financial Analytics 1.Improvise financial performance 2.In-depth insights into the financial health 3.Know your problems to find the right solutions 4.Assist in risk management 5.Financial communication to make informed decisions 6.Full analytical transparency
  7. 7. Documents used in Financial Analysis • There are three main financial statements on which the analysis is done • Balance Sheet • Income Statement • Cash Flow Statement • Annual Reports
  8. 8. Q 1 • The most commonly used tools for financial analysis are: (a) Comparative Statements (b) Common-size Statement (c) Accounting Ratios (d) All the above
  9. 9. Q 2 • Financial Analysis is significant because it a. Ignores qualitative aspect b. Suffers from the weaknesses of financial statements c. Judges operational efficiency d. Facilitates intra firm comparison
  10. 10. Q 3 • Risk associated with a particular firm’s operating conditions is which of the following risk? a) Business Risk b) Financial Risk c) Interest Risk d) Liquidity Risk
  11. 11. Q 4 What is the full form of "ATM"? a) Automatic Teller Machine b) Auto Teller Machine c) Automated Teller Machine d) Authorized Teller Machine
  12. 12. Finance Metrics •Financemetrics -financialhealthofthecompany. •fromafinancialperspective –FM-toknowhowthebusiness ? •Financemanager-toadjustthegoals&objectives. • For allmanagers,-onaweeklyormonthlybasisinthe formofemailupdates,dashboards,orreports.
  13. 13. A financial KPI or metric is a measurable value that indicates a company’s financial results and performance, provides information about expenses, sales, profit, and cash flow, in order to optimize and achieve business’ financial goals and objectives.
  14. 14. Here is the complete list of the top finance KPIs and metrics, that every financial professional needs to know:
  15. 15. 1. Gross Profit Margin • Gross Profit Margin = (Revenue - Cost of Sales) / Revenue * 100 •How much revenue you have left after COGS?
  16. 16. 2. Net Profit Margin •Net Profit Margin = Net Profit / Revenue * 100 • It measures your profit after subtracting all operating expenses, depreciation, interest and taxes divided by the total revenue • How well your company increases its net profit?
  17. 17. 3. Working Capital •Working capital is a measure of the business’s available operating liquidity, which can be used to fund day-to-day operations. •Working Capital = Current Assets - Current Liabilities Is your company in stable financial health?
  18. 18. 4. Current Ratio •liquidity ratio •This ratio is a key indicator of a company’s short-term financial health and shows whether you are able to collect accounts due in a reasonable amount of time. •Current Ratio = Current Assets / Current Liabilities Can you pay your short-term obligations? The higher your current ratio, the more capable you are of paying your bills in the short-term. Banks often recommend a current ratio higher than 2.
  19. 19. 5.Quick Ratio • measures a business’s ability to handle short-term obligations. • This metric takes into account just the short-term liquidity positions (the so-called near- cash assets) that you can convert into cash quickly. • Ratio = (Current Assets - Inventory) / Current Liabilities Is your company’s liquidity healthy?
  20. 20. 6. BERRY RATIO • This metric compares the gross profit of a company with its operating expenses, • you can use it to indicate the profit in a specific time period. • If the coefficient is above 1, it means that your company is making profit above all variable expenses, • while a coefficient below 1 will indicate that your company is losing money Are you losing money or generating profit?
  21. 21. 7. CASH CONVERSION CYCLE • The mathematical formula for calculating CCC = DIO (days of inventory outstanding) + DSO (days sales outstanding) – DPO (days payable outstanding). A steady or decreasing CCC is a fairly good sign, but if it starts to rise, an additional analysis should be made. Performance Indicators If a company is efficiently managing the requirements of the market and its customers, the cash conversion cycle will have a lower value. How fast can you convert resources into cash?
  22. 22. 8. ACCOUNTS PAYABLE TURNOVER Accounts payable turnover is a short-term liquidity financial metric and shows how quickly you pay off suppliers and other bills.
  23. 23. 9. ACCOUNTS RECEIVABLE TURNOVER How quickly do you collect payments? The higher the accounts receivable turnover ratio, the better and the more liquidity you have available to finance your short-term liabilities. measures how quickly you collect your payments owed and displays a company’s effectiveness in extending credits.
  24. 24. 10. RETURN ON ASSETS (ROA) The higher the return on assets (ROA) the better, especially compared to other companies in the same industry. how effectively they are converting investments into net income. insight into how efficiently management is using their assets to generate earnings
  25. 25. 1. Gross Profit Margin: How much revenue you have left after COGS? 2. Net Profit Margin: How well your company increases its net profit? 3. Working Capital: Is your company in stable financial health? 4. Current Ratio: Can you pay your short-term obligations? 5. Quick Ratio / Acid Test: Is your company’s liquidity healthy? 6. Berry Ratio: Are you losing money or generating profit? 7. Cash Conversion Cycle: How fast can you convert resources into cash? 8. Accounts Payable Turnover: Are you paying expenses at a reasonable speed? 9. Accounts Receivable Turnover: How quickly do you collect payments? 10. Return on Assets: Do you utilize your company’s assets efficiently?
  26. 26. Return on Equity: How much profit do you generate for shareholders? Economic Value Added: How much profit do you generate for shareholders? Employee Satisfaction: Will your team recommend you as a workplace? Payroll Headcount Ratio: How do you utilize your labor force?
  27. 27. Operating Profit Margin: How is your EBIT developing over time? Operating Expense Ratio: How do you optimize your operating expenses? Vendor Payment Error Rate: Are you processing your invoices productively? Budget Variance: Is your budgeting accurate and realistic?
  28. 28. • templates/finance#:~:text=A%20financial%20KPI%20or%20metric,bu siness'%20financial%20goals%20and%20objectives.
  29. 29. Meaning • A debt instrument is a fixed income asset that allows the lender (or giver) to earn a fixed interest on it besides getting the principal back while the issuer (or taker) can use it to raise funds at a cost. • Debt acts as a legal obligation on the issuer (or taker) part to repay the borrowed sum along with interest to the lender on a timely basis. • A debt instrument can be in paper or electronic form
  30. 30. Dirty price = Clean price + Accrued interest Dirty price is quoted in most markets, but there are exceptions, and consequently either clean price is the starting point or accrued interest is deducted from gross price.
  31. 31. • Clean price of publicly issued government bond is calculated in order of the following priority: • MP is derived from OTC = • Dirty Price is quoted • Deduct the AI = Clean Price • BSE • If no OTC & BSE – Bid • Clean price = Dirty price – Accrued interest.
  32. 32. Privately placed government bonds • In the case of privately placed government bonds we use different methods to calculate the prices of fixed or floating (variable) interest bearing bonds. • Fixed bonds Floating bonds Future cash flows of floating bonds are unknown, because coupon payments are determined only for the next period of duration, so we cannot use the formula above. In this case we simply regard these prices as 100% of nominal value.
  33. 33. Calculation of debt securities’ accrued interests • Fixed bonds • The accrued interests of fixed government bonds are calculated on the basis of Actual/Actual method
  34. 34. Floating bonds • In case of floating rate bonds we use different formulae to calculate the accrued interest depending on the reference product on which the interest calculation is based.
  35. 35. Market Technical Analysis • Technical analysis is a process used to examine and predict the future prices of securities by looking at things like • P___ m____ • C_____, • T____, • Trading V___ and other factors. • focuses on trading signals to describe good investments and trading opportunities by examining an investment's trends through its trading data and other statistical elements.
  36. 36. As a general rule, technical analysis leads the current or past price of a security as the best indicator of the future price of that security
  37. 37. Meaning Technical analysis is a method used by traders to forecast future price movements of stocks by analysing past trading activity. Chart patterns and statistical numbers are used extensively by technical analysts.
  38. 38. Technical Analysis three assumptions 1.History repeats itself 2.Market Discounts everything 3.Prices are trend driven
  39. 39. Top 5 Technical Analysis Tools For the Stock Market • In present times, have started investing in the . • Investing in the stock market = to get----------. • But keeping a close eye on the stock market trends is not everyone’s cup of tea, especially for a person who doesn’t have much experience in the field.
  40. 40. • So, for understanding the latest stock market trends- tools for technical analysis. • These tools help investors - highs and lows of the stock market trends and make things easier for them • But, considering its 21st century, there are a large number of tools available for solving the purpose and it is very tricky to choose the right one too. • The points to be kept in mind while choosing these tools are professional scalability, cleanliness, and the tool must be easy to understand and use.
  41. 41. List of 19 Best Technical Analysis Software for Indian Stock Market in 2022 1. Masterswift 2.0 Trading Platform 2. RichLive Trade Technical Analysis Software 3. MetaTrader 4 Software 4. MotiveWave Trading Software 5. ECG Trade Software for Stock Market 6. Investar Stock Trading Software 7. eSignal 8. Spider Stock Trading Software 9. Sharekhan Trade Tiger 10. Trader Guide 11. NinjaTrader 12. AmiBroker India 13. VectorVest 14. Profit Source Platform 15. Algo Trader 16. WinTrader 17. Angel Broking 18. Trade V 19. KeyStock
  42. 42. Best for tracking derivatives and equities
  43. 43. Best stock research tool for Indian market to do commodity, currency and stock markets
  44. 44. Best stock analysis tool for Forex Trading & Technical Analysis
  45. 45. Best broker neutral software
  46. 46. One of the best stock trading software with an easy chart guide.
  47. 47. One of the best real-time and end of day (EOD) technical analysis software Spider Stock Trading Software
  48. 48. Reliable technical research tools and charting software for day trading
  49. 49. • Stock research tools helps active traders quickly manage expirations
  50. 50. 9. VectorVest - Ideal for independent investors for stock portfolio management and market research
  51. 51. 10. Zerodha
  52. 52. How Technical Analysis Software for Indian Stock Market Works? • several key features - investment decisions. • Scanning tools – Research on their ups and downs through this tool. • Customizable Charts - forecast stock patterns - current as well as past data. • Up-to-Date News: To keep you updated, - the latest stock market news from relevant news sources. • Reports: go through research papers and reports developed by third parties on general and stock market. • Monitor Data: The constant availability of data such as a company’s worth, stock prices, quarterly reports, etc., lets traders and investors make informed decisions about their investment/trading choices.
  53. 53. Market risk • Systematic risk, - uncertainty associated with any investment decision. • Price volatility • Systematic risk is not specifically associated with the company or the industry one is invested in; instead, it is dependent on the performance of the entire market. • Investor to - such as inflation, interest rates, the balance of payments situation, fiscal deficits, geopolitical factors, etc.
  54. 54. Different Types of Market Risk
  55. 55. Market Risk Analytics • Market Risk Analytics is aimed at mitigating risk by offering techniques such as • Value at Risk (VaR) Assessment, • Scenario Analysis, • Stress Testing, • Correlation Analysis, • Volatility Correction etc.
  56. 56. •To determine the potential benefits of releasing his product into the market, the inventor can use scenario •What if there’s another company working on a similar technology, •it manages to release its product into the market first? • What if the material makes the phone bulky? •Will it still be as attractive as the current mobile cases?
  57. 57. Stress test
  58. 58. Meaning Stress testing is a computer-simulated technique to analyze how banks and investment portfolios fare in drastic economic scenarios. Stress testing helps to measure investment risk and the adequacy of assets, as well as to help evaluate internal processes and controls.