Managing Sport Finance by Wilson Robert;

Author:Wilson, Robert;
Language: eng
Format: epub
Publisher: Taylor & Francis Group

THE STEPS OF FINANCIAL RATIO ANALYSIS

Before you cover any of the key ratios included in this chapter it is important to recognise that they are all calculated through a series of steps. I know this will sound a bit silly but, believe me, it will make your life much easier and certainly less confusing if you approach all of the analysis progressively. The first of these steps will be to identify the key indicators and relationships that require some examination. It is likely that this will come out of the basic analysis that we explained in Chapter 7; for example, you may wish to examine profitability.

In order to carry out the analysis you must then consider who the target users of the analysis will be and why they need the information. As you witnessed way back in Chapter 1, there are many different users who will have varied needs. For example, long-term lenders of finance may be interested in the profitability and gearing of an organisation as they have a long-term interest in business viability. Suppliers, on the other hand (short-term creditors), will be more interested in the liquidity of a business as they will want to know if they are going to get their money sooner rather than later. Don't worry if you don't understand the terminology just yet as the remainder of this chapter will explain everything.

Once you are happy with the users of the analysis it will be time to do the calculations and finally the interpretations. After all, the figures will be meaningless to the untrained eye. Consequently you will need to be able to explain what everything means in the context of both the organisation and the wider industry. It is worth noting here that the calculation of the figures can be very easy. Once they have been mastered you can simply get a computer spreadsheet to do the calculations for you. The devil is in the detail though, and it is where you can really impress future employers and senior management!

To help you through all of this the following sections are systematically broken down into the ‘steps’ we talked about earlier. You will be shown the theory behind the ratio, given the formula and then taken through the practice. For the purposes of this chapter you will find that JJB Sports is our chosen organisation but there will be plenty of opportunity for you to replicate the analysis on an organisation of your choice or even those covered so far in the book, such as Tottenham Hotspur Football Club or the British Triathlon Federation.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.