Financial Analysis Techniques Research Articles

Smart financial management: the essential reference for the successful small business

Refreshingly short on math but long on practical guidance, Smart Financial Management helps owners and managers of small businesses solve everyday financial dilemmas and avoid potential problems. Readers will learn valuable and practical financial analysis techniques, as well as how to project future financial needs and possible sources of funding manage receivables, inventory and equipment investments; and how to structure and develop the business soundly and legally.

Pets.com, Inc.: Assessing Financial Performance and Risks in the e-Commerce Industry

Pets.com, Inc. (Pets) was formed as an Internet retailer of pet supplies in 1999. After experiencing rapid sales growth and hemorrhaging cash in it s first year, an initial public offering (IPO) was scheduled for February 2000. In this instructional case, you will evaluate the ability of this real-world company to continue as a going concern by analyzing the financial information and business risk disclosures included in Pets' Prospectus. The case is ideal for an auditing class as it provides a background to examine how going concern and fraud risks impact the audit reporting decision. A focus on corporate governance issues, financial statement analysis techniques, bankruptcy prediction models, and e-commerce company business models would also make this case useful for financial accounting courses (e.g., accounting theory and/or financial statement analysis).

“Energy Balancing”: How to Use the Energy Balance Data You Have Collected TO MAKE FINANCIAL DECISIONS

ABSTRACT This article extends the energy balance described in Part I of this two-part series, “Analyzing Facility Energy Use: A Balancing Act,” published in Strategic Planning for Energy and the Environment, Fall, 2001. Once you know how much energy your various pieces of equipment are using, you can then make informed decisions on what changes will make that equipment operate more efficiently. In this article, we describe ways to expand the basic energy balance format to help select cost-effective energy saving projects. We also discuss the advantages of using various financial analysis techniques such as Simple Payback Period, Savings-to-Investment Ratio, Internal Rate of Return, and Net Present Value. We describe these techniques in an extended energy balance spreadsheet.

NORN PREDICTOR — STOCK PREDICTION USING A NEURAL OSCILLATORY-BASED RECURRENT NETWORK

Financial prediction is one of the most typical applications in contemporary scientific study. In this paper, we present a fully integrated stock prediction system – NORN Predictor – a Neural Oscillatory-based Recurrent Network for finance prediction system to provide both a) long-term trend prediction, and b) short-term stock price prediction. One of the major characteristics of the proposed system is the automation of the conventional financial technical analysis technique such as market pattern analysis via the NOEGM (Neural Oscillatory-based Elastic Graph Matching) model and its integration with the Time-difference recurrent neural network models. This will provide a fully integrated and automated tool for analysis and investigation of stock investment. From the implementation point of view, the stock pricing information of 33 major Hong Kong stocks in the period from 1990 to 1999 is being adopted for system training and evaluation. As compared with the contemporary neural prediction model, the proposed system has achieved challenging results in terms of efficiency and accuracy.

The effects of an uncertain country environment upon leadership and strategic planning practices

This study examines the nature of strategic planning activities of companies operating in high uncertainty country environments. In these companies, CEOs perceive strategic planning to lead to better decision making due to better clarification of goals and policies. The tools mainly used comprise financial analysis, SWOT and contingency planning techniques. The CEOs and the top management teams are particularly involved in the strategic planning activity. In contrast, middle, lower-level management and outside consultants play only a minor role. Copyright © 2000 John Wiley & Sons, Ltd.

Statistical physics in foreign exchange currency and stock markets

Problems in economy and finance have attracted the interest of statistical physicists all over the world. Fundamental problems pertain to the existence or not of long-, medium- or/and short-range power-law correlations in various economic systems, to the presence of financial cycles and on economic considerations, including economic policy. A method like the detrended fluctuation analysis is recalled emphasizing its value in sorting out correlation ranges, thereby leading to predictability at short horizon. The ( m, k)-Zipf method is presented for sorting out short-range correlations in the sign and amplitude of the fluctuations. A well-known financial analysis technique, the so-called moving average, is shown to raise questions to physicists about fractional Brownian motion properties. Among spectacular results, the possibility of crash predictions has been demonstrated through the log-periodicity of financial index oscillations.

The effects of an uncertain country environment upon leadership and strategic planning practices

This study examines the nature of strategic planning activities of companies operating in high uncertainty country environments. In these companies, CEOs perceive strategic planning to lead to better decision making due to better clarification of goals and policies. The tools mainly used comprise financial analysis, SWOT and contingency planning techniques. The CEOs and the top management teams are particularly involved in the strategic planning activity. In contrast, middle, lower-level management and outside consultants play only a minor role.

The Usefulness of Financial Reporting in Spanish Local Governments

Since 1992, accounting for Spanish local governments has been undergoing substantial change. The application of a new regulation has introduced the double entry system, an approximation to the accounting terminology used in the private sector and the presentation of financial statements beyond the purely budgetary reporting. In this context, the paper attempts to examine the extent to which the new regulation has achieved the objectives of financial reporting, who the users of the information could be, what the usefulness of the financial statements is and what they are used for in local governments. The results prove that the financial reporting of local governments can be useful for potential users like audit institutions, financial institutions or creditors. However, there is a long way to go before we can say that the information is used to the maximum. This implies that further progress is necessary in the use of financial information in local governments, and fundamentally it is necessary to introduce techniques of financial analysis traditionally used in business entities.

The Present Value of Software Maintenance

Abstract Deciding to engage in a software project typically results in incurring costs and generating revenues over a long time period. Introducing new technology into the software process can likewise be considered an investment decision. This paper presents capital budgeting techniques employed among financial analysts and upper-level management to evaluate such investment decisions. Examples are given to illustrate financial analysis techniques based on actual data reported in the software engineering literature. Under proper time discounting, the commonly reported effect of modern programming practices to shift costs to earlier in the lifecycle decreases the net present value of a project unless resulting gains in quality and productivity more than compensate. The principal theses of this paper are that software managers should use these techniques in performing cost analyses and that software process measurement programs need to be designed with the goal of supporting such analyses.

Italian Treasury Credit Certificates (CCTs): theory, practice and quirks

CCTs (Italian Treasury credit certificates) were first introduced in 1977 in order to meet the need for more effective management of the public debt. The CCT was accepted in the market as a `centaur': a short-term security in its yield and risk features, but with a long maturity. However, in terms of techniques of financial analysis and portfolio management, the methodological approach to CCTs appears to be generally confused. JEL: G20

Financial planning and analysis techniques of mining firms: A note on Canadian practice

This paper reports on the results of a survey of the financial planning and analysis techniques in use in the mining industry in Canada. The study was undertaken to determine the current status of these practices within mining firms in Canada and to investigate the extent to which the techniques are grouped together within individual firms. In addition, tests were performed on the relationship between these groups of techniques and both organizational size and price volatility of end product. The results show that a few techniques are widely utilized in this industry but that the techniques used most frequently are not as sophisticated as reported in previous, more broadly based surveys. The results also show that firms tend to use ‘bundles’ of techniques and that the relative use of some of these groups of techniques is weakly associated with both organizational size and type of end product.

INVESTMENT DECISION CRITERIA USED BY LISTED NEW ZEALAND COMPANIES

Abstract:This paper reports the results of a survey of listed New Zealand firms with regard to their investment objectives, their methods of evaluating investment projects and of estimating appropriate hurdle rates, and methods used to evaluate and adjust for project risk differences. Comparisons with similar studies of firms located in the U.S. and Australia indicate that New Zealand firms use accepted normative financial analysis techniques to a much lesser degree than firms in these other countries. The relatively greater usage of accounting‐based rather than market‐based measures by New Zealand firms is particularly marked.

A Reevaluation of Tax Sheltered Annuity Cost and Performance Measurement Techniques

New complex deferred annuity contracts render most past consumer comparison efforts simplistic and unrealistic. A questionnaire solicited data from thirty different insurers concerning their annuity offerings. Variable annuity prospectuses and fixed annuity policies are analyzed. Performance measurement techniques are then developed and applied to past and current performance. Portfolio beta analysis as well as a risk-free fee-sensitive efficiency ratio are suggested as methods for evaluating variable annuities, while portfolio rate of return and effective annual yield methods are suggested for analyzing fixed annuity performance. The surge in demand for tax sheltered annuities by employees of 501(c) (3) organizations, by the self employed under the Keogh Act and by those eligible for individual Retirement Accounts, has been met by increasing numbers of insurers offering and constantly modifying qualified plans [1]. Many studies have been conducted for various groups interested in assisting their members make intelligent choices among alternative plans.' In general, however, the prospective purchaser of a tax sheltered annuity is faced with two basic problems: (1) accurate and complete data are not available through any competent, unbiased source; and (2) methods for comparing costs and surveys are only in their formative stages, leaving the prospect with many unanswered questions and often some incorrect impressions. Weisenberger provides some limited data, but not nearly enough to make an informed choice [2]. This study has two main purposes: (1) to reexamine methods currently used to compare alternative annuities, especially in light of changing and unusual practices of insurers; and (2) to suggest improvements in methods of comparison by utilizing some accepted as well as some new financial analysis techniques. It is not the purpose to provide a shoppers guide to tax sheltered annuities. It is assumed that the reader already is familiar with one or more of these types of studies. Concern is with techniques for analysis, rather than current plan comparisons. The paper is divided into three primary sections: techniques for analyzing (1) fixed annuity performance, (2) variable annuity performance, and (3) fee schedules. Jerry D. Todd is Associate Professor of Insurance, Graduate School of Business, The University of Texas at Austin. Several studies have remained unpublished; those published include [3], [4], and [6].