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Analysis
Introduction:
This study uses Optimist 3000 software to conduct a financial analysis of the CSL Company, (CSL limited develops, manufactures and markets pharmaceutical products of biological origin). Study will start off with interpretation of generated reports (Ratio Analysis and Cash flow Analysis) from optimist software, past five year data is used to analyze the trend of the company from 1998 to 2002 [Appendix 4-Appendix 8][1]. Concept of roll forward and goal seeking (what if analysis) is also discussed in this report in assistance to managers and further the report would include the benefits and limitations of using optimist software from manager, creditor and investor’s perspective.
Optimist3000 allows shifting through large amounts of data in order to extract valuable business information. It provides a summary of financial scorecard, which incorporates the following features [2]:
• Goal seeking tools allows forecasting results of specific financial changes.
• Budgeting is now very efficient with the roll forward function which enables a budget to be created in just two key strokes.
• Using variance reporting one can analyze the relationship between profit and loss statement and balance sheet.
• Key performance measures are presented geographically making it easy for non financial people to interpret financial information.
After loading the figures of profit and loss and balance sheet in loading zone of optimist software, the software calculates different results i.e. Ratio analysis, cash flow statement, one unit, marginal cash analysis, and comparative analysis of the company over last two years. The results are based on consolidated figures of CSL limited (1998-2002) [Appendix1, 2, 3].
Ratio analysis:
Ratios [Appendix 4 - Appendix 8] are based on historical financial data and, as always, interpretation must bear in mind the accounting conventions used (U.S. generally accepted accounting principles [GAAP] or international accounting standards [IAS]) [3] and the characteristics of the industry in which the company operates
Ratios can be used for horizontal or vertical analysis. The objective of horizontal analysis, or comparing a company's performance over a number of years, is to identify trends that may give insights into the company's future performance and ability to repay a bank loan.
The objective of vertical analysis, or comparing different companies within the same industry, is to identify any variance from the norm, to determine the reason for the variance, and to assess the effect on the credit.
For this study horizontal analysis is conducted based on last five years financial statements. In order to analyze the trend, the results are also shown in graphical format which also give us an idea at a glance about company’s performance.
Profit & Loss results;