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Introduction. The accounting itself is often referred to as the “language of business”

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The accounting itself is often referred to as the “language of business”. Indeed, like no man without ability to express his thoughts clearly and understandably can achieve very much in life, no firm can succeed without a good accounting system. International best practice in microfinance around the world suggests good financial analysis is the basis for successful and sustainable microfinance operations.

Financial analysts often compare financial ratios These ratios are calculated by dividing a group of account balance, taken from the balance sheet and / or the income statement.Comparing financial ratios are merely one way of conducting financial analysis.

For my research I choose OAO “MTS” - is the largest mobile operator in Russia and CIS. Mobile TeleSystems is the leading telecommunications group in Russia, Eastern Europe and Central Asia, offering mobile and fixed voice, broadband, pay TV as well as content and entertainment services.

The market appreciated the Company’s rapid growth over the recent years. Today the capitalization of “MTS” totals some USD 20 bln. So, I consider, that it’s very actual topic for research nowadays.


Theory

 

Financial accounting

Financial accounting is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders.

Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company. Managerial accounting provides accounting information to help managers make decisions to manage the business.

Financial statements (or financial reports) are formal records of a business' financial activities.

In British English, including United Kingdom company law, financial statements are often referred to as accounts, although the term financial statements is also used, particularly by accountants.

There are four basic financial statements:

1. Balance sheet: also referred to as statement of financial position or condition, reports on a company's assets, liabilities and net equity as of a given point in time.

2. Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's results of operations over a period of time.

3. Statement of retained earnings: explains the changes in a company's retained earnings over the reporting period.

4. Statement of cash flows: reports on a company's cash flow activities, particularly its operating, investing and financing activities.

 


For large corporations, these statements are often complex and may include an extensive set of notes to the financial statements and management discussion and analysis. The notes typically describe each item on the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements.

Financial analysis

International best practice in microfinance around the world suggests good financial analysis is the basis for successful and sustainable microfinance operations.

Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project.

It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions. Based on these reports, management may:

  • Continue or discontinue its main operation or part of its business;
  • Make or purchase certain materials in the manufacture of its product;
  • Acquire or rent/lease certain machineries and equipments in the production of its goods;
  • Issue stocks or negotiate for a bank loan to increase its working capital.
  • other decisions that allow management to make an informed selection on various alternatives in the conduct of its business.

Goals

Financial analysts often assess the firm's:

1. Profitability - its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations;

2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term;
3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations;

Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time.

4. Stability - the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators.


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