Assessing Financial
Information
Statistics & Risk
Management
Copyright © Texas Education Agency, 2012. All rights reserved.
1
Two Main Sources
 Internal
– Finance Department
– Accounting Department
 External
– News Media
– Universities
– Government
Copyright © Texas Education Agency, 2012. All rights reserved.
3
Technology
 Computerized Financial Accounting
Systems.
 Web Browser Based Markets & Brokers.
 Hand-Held Delivery Systems.
 TV and Radio Delivery Systems
Copyright © Texas Education Agency, 2012. All rights reserved.
4
Preliminary Assessment
 Consider the Source.
 Consider the Objective.
 Consider the Audience.
 Look beyond the conclusions and examine the data!
 How does it apply to you?
 Is an Action necessary?
– Are procedural or policy changes needed?
Copyright © Texas Education Agency, 2012. All rights reserved.
5
Cynics Look at
 Sample Size and Selection
 Gathering Methodologies
 Analysis Methodologies
 Incomplete Data Picture
 Misleading Conclusions
Copyright © Texas Education Agency, 2012. All rights reserved.
6
Assessment Ratios
 Profitability Ratios measure the profitability
of the organization.
– Gross profit margin
– Operating profit margin
– Net profit margin
– Return on assets (ROA)
– Return on equity (ROE)
Copyright © Texas Education Agency, 2012. All rights reserved.
7
Assessment Ratios
 Liquidity Ratios measure the organizations
ability to meet short-term obligations.
– Current ratio
– Quick ratio
Copyright © Texas Education Agency, 2012. All rights reserved.
8
Assessment Ratios
 Debt Ratios measure the amount of debt
an organization is using and the ability of
the organization to pay off the debt.
– Total assets ratio
– Times interest earned ratio
Copyright © Texas Education Agency, 2012. All rights reserved.
9
Assessment Ratios
 Asset Activity Ratios measure how
efficiently the company is using its assets.
– Average collection period ratio,
– Inventory turnover ratio, and
– Total asset turnover ratio.
Copyright © Texas Education Agency, 2012. All rights reserved.
10