Financial Analysis and Reporting

Financial Analysis and Reporting. P repared by: Neralyn C.Tuñacao BSBA-3B.

Learning Objectives:. Financial characteristics in Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies. Personal Financial Statements and Accounting for Governments and Not for profit organizations or a S tatement of financial condition.

—Someone Famous. partl. FINANCIAL CHARACTERISTICS Cash Special Industries: Banks, Utilities, Oil and Gas. Insurance, Real Companies SPECIALIZE D INDUSTRY BANK Regula HO n a Federal chatter to tho C u rroncy State charter by state banking Sphere of COntmIled by state F I system to Federal Financial Statements Balance Sheet 10 mto Typical assets SOCw5&S. Fixed stat is ot' bans and securities is deposits and Other interest (margin) Ratios Many ratios do not 'or banks -related ratios Ratios Eaming Assets to Total ngs market EXAMPLES OF COMPANIES Citigroup BOO unibank Metropolitan Bank and Trust Bank or the Philippine Islands Land Bank or the Philippines, • Philippine National Bank,.

. and FOIC Member banks maintain reserves at district reserve bank to risk d rise itwtt LDC dueloped countries) loans risky than Balance Sheet Review related paly Albwance 'or ban Other real estate taken d u rmg Liabilities savings, time/demand deposits in this habilty indeteS funds L.»g temn: loan mg torm Interest rates Falling: reduæs ("temSt Irwwasing: inc s oxponso e Statement trading gai securities transactions as etS cash, High the tmk to Interest Margin to Average Eaming Assets Ratios Loan Loss Coverage Ratio (Pretax income • 10 r loan bsses) • offs Measures Amt q of of bans -Equity Capital to Total Security Bank Corporation. China Banking C o ration _ Development Bank ot the Philippines, First Metro C or poration.

Balance Sheet Stockholders' equity to total assets Low stækholders• equity indicates greater risk O' failure High equity ts risky capital other inc o s Regulators capital in to risk adjusted assets Balance Sheet and Discussion and Analysis for indication assets no longer producing or producing reduced income N maccmal loans: Measun's the extent of equity ownership in the Ratios Timu Capnal A deposns rag e equity A of debt -to-Oq u i ty Stcxkhölders MMe safety More its indicate investment Loans to Deposits A type Of asset to liability or debt rat io.

UTILITIES Subject to regulation and regulation Accounting procedures prescribed by Federal Energy Regulatory C ss ion Federal Communi cation s Commission payments am due. being Renegotiated bans: modified of a agreement Watch carefully. those may ngencies Financial Statements Balance sheet Plant. property. and equipment iS listed Capitalization section includes sources of financing Long term capital Long term debt Current liabilities and deterred charges Financial Statements Income statement Operating Other in COrne Interest charges Financial Allowance for funds used during St ion [income Few of the traditional ratios are regulated utilities Operating Ratio Funded Debt to Operating Abra Electric Cooperative Bohol 1 Electric COO pera t Manila Electric co m pany (Me ralco) Manila W'ater Company, Calbayog Water Company. 8 OhOl Wate r utilities, Inc. Bohol II Electric Cooperative nC_.

State regulatory agencies Regulated utilities have added non- regulated businesses General background Major fipact on • Construction wc'rk in (balance Sheet asset] Substantial construction work in should viewed as more risky Rate base determination Will n Ot normally consi construction work in Disallowed costs provide no retum Successful Efforts Versus Full Costing Methods statement) Allowance for equity funds 10ther incomel An assumed rate ot return on equity funds Allowance for borrowed funds (interest charges] Operating is plant equipment I ated d e Fyeciation nC construction Measures debt Ratios •Percont Earned on Relates net earnings to the assets primarity intended to generate earnings -Operating to A Of operating asset ratio Fixed plant is often much larger than BOHOL SOLAR ENERGY INC. PANGLAO WATER SERVICES INC. • Petron Corporation.

state m from n for and Spec & requied s u ppmeMal OIL AND GAS ssfu I Efforts Full Cæting effo"s are costs Capital Q e COStS o' successful • Immediate* COStS O' unsu I conseNative approach y net due to immediate unsuccessful efforts E ffMtS . Practical Smaller companies choose full costing met hod Larger balance due to capdalization • Short n highe r profit (expense iS depletion , not full COSI) prese nts more picture to creditors and Larger compan•s use variation Of successful Smaller balance sheet with only successful efforts Capdalized Shon run lower profit due to immediate expensing of unsuccessful efforts Filipinas Shell • Phoenix Petroleum • sea0il Philippines Unioil PetrcJIeum Philippines Inc. Saudi Aramco China Petroleum & Chemical Corp. Royal Dutch Shell PLC petro China and Sinopec Group.

versus costing Full It—y : a • to -'n total, the the lining of s FAS oil a r -Ki reserve quant i 10s ns for Costs gas.

costs relating to oil and ga s. ucing ac1Nties A Standardized measure 01 disco u Med tulure net Cash W I ating to proved oil and gas Regulation and Ove t TRANSPORTA -Civil Aeronautics Commercial Uniform system of accounts and reporting •Interstate Commerce Commission Interstate Financial Statements -Balance Sheet Similar to manufacturing and retailing reporting Plant. property, and equipment makes up large portion of Statement to utility reporting Revenues and expenses grouped by natural Objectives a functional Reports operating data Commerce C 0m m ission•s Annual R epod on stat i ste American Trucking ASSIEia t Of the Motor -Operating Ratio Operating nue Philippines Company Ocean Trans• port Group of Corn pa Company.

Inte carriers unifcwn system of accounts and reporting revenues minus operating expenses) presented in single step the ratio -Long-Tem Debt to pm„rty mom rty sources o' with which property tmn -o„rating Revenue to operating as sots many in -per Mile, per person, and Not statement NLEX Corporation PHILIPPINE AIRLINES, INC. pacific East Asia Cargo Airlines, Inc • Lite Shipping NINJA EXPRESS TECH PHILIPPIEINC. GRAa FINANCIAL SERVICES PHILIPPINES INCORPRORATED.

INSURANCE Types Of S ON ice Types of o rganizations companies: retum ate 0M*rship interest V ratemal Denel' a mutual ore a need group similM primary regulation is at state SAP Balance Sheet under • High u idity. am o rtized cost and fair value R e stockholders equity for unrealized gains and on . Assets other than Investments • Operating Policy acquisition costs are deterred and matetwd to earning period GAAP: expensed tor and other Balance Shoot Under -Liabilit•s LOSS Income Statement under GAAP -Duration Of contract revenue Shon duraton; over Of the contract in to Ratios I nduStry specific based SAP reporting to states Ratios based on GAAP data Prouabilty In related protection provided surrounding insurance bndustry reporting i zed When PRmium risk Contracts accou as Realized gain snosses from investments TWO a CCOunting Standards: SAP GAAP Insurance Stock typ to the a market Standard I nsurance Company I ted Aetnelmark Philippines Insurance Agency Inc. Pru Life Insurance Corp. Manulife Philippines Insular Life Assurance Company. Ltd • Sun Life of Canada (Philippines) • Philippine Axa Lite Insurance Corporation.

u auspices the is on Ratio by GA_AP evists (SEC) Sources of comparative ratings life fly Ratinas (Fair" "Not Federal oversight and enforcement Act 1945 repotted at present poucy and ccmtract clainw: claims accrued net 01 industry Review Lmrealized gains and.

COMP A SEC Natonwi«» FBI Contend con ve nt estat e supp men t wdh current value based SM Prime Hokiings Top and Broker Re Estate ccmpany (RLC).

PART 2.

SOLUTION:. Accounts Tax Bases Estimated Current Value Excess of Estimated Current Values over Tax Bases Effective Income Tax Rates Amount of Estimated Income Taxes Cash $ 20,000 $ 20,000 - - Marketable securities 80,000 100,000 $ 20,000 28% $ 5,600 Options 0 30,000 30,000 28% $ 8,400 Residence 100,000 150,000 50,000 28% $ 14,000 Royalties 0 20,000 20,000 28% $ 5,600 Furnishing 40,000 20,000 (20,000) - Auto 20,000 15,000 (5,000) - Mortgage (70,000) (70,000) - - Auto loan (10,000) (10,000) - - Total estimated income tax $ 33,600.

Illustration of Preparation of the Statement of Financial Condition Mary Lou and Ernie Statement of Financial Condition Dec. 31, 2008.

COMMENTS: 1. Many would consider the net worth $241,400, a relatively high amount . 2. Liquid assets total $ 120,000 (cash 20,000 and marketable securities 100,000 ). 3. Most of the Liabilities appear to be long-term (mortgage, 70,000 ). 4. Compare specific assets with related liabilities:.

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