3. Financial Analysis
Financial analysis is a process of discovering economic facts
about an enterprise and/ or a project on the basis of an
interpretation of financial data.
Utility of Financial Analysis
Appraisal of the project
Performance index
Index pitfalls
Utility of Financial Analysis and account statements
- Large scale production, Regulatory provision, Income tax
accounting, Executives, Bankers, Investors, Mercantile
credit
4. Financial Analysis Tools
Trend Analysis
Common size statement
Ratio Analysis
Fund flow analysis
Break even Analysis
Cash budgetary
Proforma Statement
5. Different Sources of Finance
Sources of Finance
Internal Accruals
Preference Capital
Equity Capital
Debt
Equity
Term Loans
Debentures
Working Capital
Advances
Misc. Sources
6. Different Sources of Finance
Types of Industrial Finance
Long Term Finance
Medium Term Finance
Short Term Finance
Bank Credit
Trade Credit
Installment Credit
Customer Advances
Issue of Shares
Issue of Debentures
Loans from Banks and
other FIs
Public Deposits
Retained earning
Issue of Shares
Issue of Debentures
Loans from Financial
Institutions
Retained Earning
7. Different Sources of Finance
FIXED
State Govt.
WORKING CAPITLAL
SFCS Commercial Banks
SIDCS
COMMERCIAL
BANKS
INDUSTRIAL AND
INVESTMENT CORPN
CO-OPERATIVE
BANKS
INDIGENOUS
BANKS
MONEY
LENDER
8. Sources of Finance - Equity
Authorized Capital
Issued Capital
Subscribed Capital
Paid Up Capital
Rights to Equity Shareholders
Right to Income
Right to Control
Pre-emptive Rights
Right in Liquidation
9. Methods of Issuing Equity Capital
Initial Public Offering
Seasoned Offering
Right Issue
Private Placement
Preferential Allotment
10. Comparative Analysis of Methods of
Issuing Equity Capital
Public
Issue
Right
Issue
Private
placement
Preferential
Allotment
Amount that
can be
Raised
Large Moderate Moderate Moderate
Cost of Issue High Negligible Negligible Low
Dilution of
Control
Yes No Yes Depends
Degree of
Under pricing
Large Irrelevant Small No
Market
Perception
Negative Neutral Small Neutral
11. Sources of Finance – Debentures
Features:
Types of Debentures:
Deep Discount Bonds
Convertible Debentures
Floating Rate Bonds
Secured Premium Notes
12. Working Capital Advances
Forms of Bank Finance
Cash Credit
Bank overdraft
Loans
Purchase/Discount of Bills
Letter of Credit
13. Sources of Finance-Misc. Sources
Lease and Hire Purchase Finance
Operating Lease
Financial Lease
Unsecured Loans and Deposits
Special schemes of Institutions
Bill Rediscounting Scheme
Supplier’s Line of Credit
Short term Loans from Financial Institutions
Commercial Papers
Factoring
14. CAPITALIZATION
OVERCATILASATION UNDERCAPITALISTIN
A company is said to be an
overcapitalized company when it is
consistently unable to earn the
prevailing rate of return on the
capital invested.
The earning capacity of this
company is low as compared to the
capital invested.
It means that the capital is utilized
inefficiently.
It indicates the weaker financial
position and unhealthy state of
affairs of the company.
The market value of the company’s
share is lower than the book value
of the share.
A company is said to be an
undercapitalized when the rate of return
of return is exceptionally high as
compared to the rate earned by similar
companies in the same companies.
The earning capacity of an this
company is exceptionally high in
comparison to the capital invested.
It suggest that the capital is utilized
the most efficiently.
It indicates a strong financial position
and healthy state of affairs of the
company.
the market value of share of the
company is more than the book value of
the share.
15. Foreign Currency Term Loan Assistance
Deferred Payment Guarantee Assistance
Guarantee Assistance
Underwriting Assistance
Assistance by way of Direct subscription to Shares
Soft Loan Assistance
Assistance though Technical Development Funds
Bills Rediscounting Scheme
Seed Capital
16. Factoring
Services Provided by the Factors
1. Maintenance and Administration of sales ledger
2. Collection facility of account receivables
3. Financing facility
4. Assumption of Credit risk
5. Provision of advisory services
17. Factoring
Recourse and Non recourse Factoring
Disclosed and Undisclosed Factoring
Advance and Maturity Factoring
Full Factoring
Domestic and Cross Border Factoring