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Finance

Beyond calculations, finance must be applied to real-world situations.

(Please be advised that this site only provides a sneak peek into finance)

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Financial Statements

Financial statements show a company’s financial health. Understanding them is crucial for making informed decisions.

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Balance Sheet: Shows what a company owns (assets), what it owes (liabilities), and its equity. Example: Checking if a company has enough liquidity to pay off its debts.

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Income Statement: Reveals whether a company is making or losing money. Example: If expenses exceed revenue, the company may need to cut costs or increase sales.

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Cash Flow Statement: Helps determine if a company has enough cash to operate. Example: A profitable business can still struggle if customers take too long to pay.

Financial Analysis:

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Reading financial statements isn’t enough; we need to analyze key indicators that reflect business performance.​

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Liquidity Ratios: Can the company meet its short-term obligations?​

Profitability Ratios: How efficiently is the company generating profits?

​Debt Ratios: How dependent is the company on debt?​

​Efficiency Ratios: How well is the company utilizing its resources?

Important
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Net Present Value (NPV)
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Internal Rate of Return (IRR)
 
Sensitivity Analysis: Evaluates what happens if key variables change. Example: If sales drop by 10%, will the business still be profitable?
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Coefficient of Variation: Compares risk and return. Example: If two investments offer the same return, but one has lower risk, it’s the smarter choice.
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Financial Forecasting: Uses statistical models to project revenue and expenses. Example: A supermarket can predict which products will sell the most during the holiday season.
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Regression and Trend Analysis:
 
Uses historical data to forecast future performance. Example: If a company has grown 5% annually over the past five years, it’s likely to follow a similar trend.
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Buying vs. Leasing Assets: Should a company buy machinery or lease it? Financial projections help make the call.
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Cost Optimization: Should a company cut staff or invest in technology? Financial and strategic impacts must be considered.

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