As a financial analyst, what are the basic tools you use in order to make a judgment of appreciation on the financial profile of the company?

There are various tools for evaluation of the financial profile of a company. Of the basic tools, financial ratio analysis is the most widely used tool. We calculate the different ratios for financial performance, financial position and liqiuidity ration etc and compare the ratios with other comparable periods for the same company and for other companies in the same industry and also with the benchmarks. This gives much information to judge the financial profile of a company from verious perspectives.

There are Number of basic Tools which financial analyst can use for observing apreciation in assets, the common Tool is Ratio Analysis :

We can use Profitability ,Liquidity and Gearing ratios for making judgment on Financial Position of company

Example of few ratios :

Asset Turnover Ratio = Total Assets/Net Sales * 100 

ROCE= Return/Capital Employed *100

Profit Margin = Profit After Tax/Net Sales*100

ETC

All ratios we will compare with company past record and other competitor for further analysis.

Financial analysis tools for many of them:1. Vertical and horizontal analysis2. 2. The financial ratios of all kinds - liquidity ratios - activity ratios - debt ratios - Profitability ratios3. Analysis of the statement of cash flows

• Ratio Analysis
• Qualitative Analysis
• Management Structure
• HR analysis

I do agree with common belief stating that investors look for owners not managers. Because managers, who act as if they are woners of the company they run, are the best ones.

1) So, 1st is we consider management.

2) Second, we consider historical data to come up with some resonable estimations for the future forecast and analyze company's past to present performance through tools, such as ratio analysis.

3) Third, we can develope financial model of a company with more or less accurate forecast, with the help of software like MS excel. Forecasted financial position through modelling will give a decent estimations to evaluate the company. Companies are appreciated not with what they achieved in the past but what they are expected to achieve in the future. Discounted Cash Flow based valuation methods such as free cash flow to firm/equity, ratio analysis, and some other additional measures are carried out to on forecasted financial state of the company.

4) In addition, we watch for some external factors as well. To do that systematically we can use PESTEL analysis.   

As a financial analyst I would suggest following tools for the appreciation of financial profile.

• Debt equity ratio.
• Gearing ratio.
• Liquidity ratio.
• Profitability ratio.
• Source of funds.
• Dividend pay out ratio etc.
• Current position in the industry.

Those could totally be the comparison of financial ratios over past years to see what progress company had in its profitability, liquidity, activity and solvency. Off course ratios themselves are not enough to provide complete picture, however, they are very useful for quick evaluation.

There are many tools to analyze the company profile but it only depends on stakeholders' prespective in which way they want to analyze the profile because as an investor you will analyze the compapny prfitability growth prospects payout history beside of all ratios and other tools i:e peer analysis, Board of directors, Economic & government policy about the industry covenants and many more things ...its a very detailed topic to ao analyze the company profile.

The balance sheet,

• The general operating account,
• The profit and loss account,
• The states of source and use of funds,
• The synthetic complementary states providing special information about a particular aspect of the financial life of the company (depreciation tables, status of receivables and payables, state of provisions, timing of repayment of borrowing, etc.),
• The various statistics that capture the internal and external conditions of operation of the business.

The most common tools are profit margin and cash flow generated by the company. Next, take a look at performance Return On Invested Capital (ROIC). At the end check your risks, liquidity (quick ratio) and debt ratio.