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Articles by Probir Banerjee
Page 6 of 45
Difference between Strategy and Strategic Plan
Although strategy and strategic plan are considered as the same, it is wrong to assume so. There are some distinct differences between strategy and strategic plans. Strategy and strategic plan are the parts of financial planning wherein companies try to chart their future course of action depending on the resources that the company has under its control. Let’s look at strategy and strategic planning individually to understand what they mean and what their basic differences are.What is Strategy?Strategy is the base of planning but it is not the planning itself. The strategy provides the platform for the company to build ...
Read MoreHow to Conduct Discriminant Analysis to Predict a Company's Power?
What is Discriminant Analysis?Discriminant analysis is a widely used tool in Machine Learning, Statistics, and Finance. It is a manner to classify the targets based on some assumptions, and then use them to predict the future of a process. As is obvious, since investors and analysts want to predict a company’s power in the future, the tool is of prime importance to them.The discriminant analysis relies upon continuous independent variables to form a pattern that shows relationships between two parameters or predictive equations that may satisfy the relationship for the data sets. These equations are then used to classify the ...
Read MoreParametric and Non-Parametric Methods of Efficiency Analysis of Company
Parametric Methods of Efficiency Vs Non-Parametric Methods of EfficiencyParametric and non-parametric methods of efficiency measurement have gained significant momentum in the current decade. However, the choice of the method for efficiency management has been a matter of lengthy debate. The parametric method has the advantage of being free from the random noise of inefficiency. However, separating true noise from the process may be a restrictive process.The non-parametric method has the advantage of justifying the axiomatic properties. It also does not have as many restrictive properties as that in the parametric method. However, non-parametric methods do not differentiate between true inefficiency ...
Read MoreWhat are the Limitations of Ratio Analysis?
What is Ratio Analysis?Ratio analysis is a good way of comparing the conditions of a business with its peers. It helps businesses understand their own strengths and weaknesses.Ratio analysis are basically tools to measure the various relationships between two or more financial items. It also helps businesses compare themselves with companies of scale. However, there are some drawbacks of ratio analysis that affect its efficiency.Limitations of Ratio AnalysisThere are some prominent drawbacks of ratio analysis which analysts and investors should be aware of. They are as follows −Base of ComparisonAlthough ratio analysis is a good way to measure the performances ...
Read MoreWhat is the Purpose of Inter-Firm Comparisons?
What is Inter-Firm Comparisons?Financial ratios can be compared with one another in order to get a gist of the performance and other attributes of a company in relation to the other major firms. Such a performance of a company that shows the financial ratios is known as Cross-Sectional Analysis or Inter-Firm Comparison.In an Inter-Firm Comparison chart, various attributes such as Market Share, Return on Equity (ROE), Net Worth (NW), Capital Employed (CE), Net Sales (NS), Profit Before Interest and Taxes (PBIT), etc., are put in one table. This table helps one to see the performance and efficiency of one company ...
Read MoreTrend Analysis Vs Ratio Analysis
Businesses use past and present data in order to find a pattern and predict the future. This review of past and present forms of data is usually known as Trend Analysis which is one of the most popular tools in the hands of financial analysts and managers. Ratio analysis, on the other hand, are tools to measure the various relationships between two or more financial items.Financial ratios can be used to represent trend analysis. In fact, financial ratios are the backbone of trend analysis.Trend Analysis Vs Ratio AnalysisFollowing are the differences between Trend analysis and Ratio analysis −Based on the ...
Read MoreHow to Analyze Comparative Financial Statement?
What is Comparative Financial Statements?Comparative financial statements provide a comparison between key financial metrics for two consecutive years. It is a very useful tool to check whether the company’s financials are moving in the right direction. It is a document that lists two or more years of financial performance of a company to offer a bird’s eye view of the comparison between two years of financial data. However, some caution must be taken while comparing the items in two financial statements.Analyzing Comparative Financial Statements is not tough as the interpretation of data does not require expert knowledge. However, in the ...
Read MoreComparative Financial Statement: Definition and Purpose
What are Comparative Financial Statements?Comparative financial statements are statements which show a company’s statement in two or more consecutive periods in a single statement. Usually, the entities included in the comparative financial statements include balance sheets, profit and loss accounts, and cash flow statements for two consecutive years.The idea behind preparing a comparative financial statement is to evaluate or judge the performance of the company in two financial years.Generally speaking, the financial statements which are usually included in a comparative financial statement are as the following −The Balance Sheets of two or more financial periods.The income statements with data from ...
Read MoreHow is Equity Growth Measured?
What is Growth Rate?The growth rate of a company is its ability to grow using and investing whatever it has in its operations. The rate is a measure of the capability of a company to have an efficient mechanism of operations that could churns out more profits in two comparable situations.Like most other ratios, the growth rate is not useful when used alone. For the growth rate to be meaningful, two or more companies should be considered from the same industry. The growth rates of companies also depend on the circumstances that are related to the company’s business.For example, if ...
Read MoreRole of DuPont Analysis in Assessing Company's Earning Power
What is DuPont Analysis?The DuPont Analysis is a financial model that offers insight into the basic performance of a company. It breaks down the Return on Equity (ROE) into three key individual metrics to do so. The DuPont analysis is a product of asset turnover, gross profit margin, and operating leverage.Simply put, $$\mathrm{ROE\, =\, Net\: Profit\: Margin\, \times \, Assets\: Turnover\, \times\, Equity \: Multiplier}$$It may be noted here that the ROE of a company is considered as its earning power. Another component that is considered as a part of earning power of a company is the Return on Assets ...
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