Introduction to Financial Management

examination and evaluation of the relationships between the data that are reported in the

financial statements.

Analysis can be done horizontally or vertically using both firms past financial

performance and its prospects for the future using relative quantitative techniques like

percentages, ratios, and proportionate variables than absolute values.

Financial ratios can be classified into five groups:

(1) Liquidity ratios (2) Activity ratios (3) Leverage ratios (4) profitability (5) market

value ratios

Table 1 an extract from Sierra Leone Insurance Commission (SLICOM) Financial Report

END OF YEAR FINANCIAL STATEMENT ANALYSIS- 2004 -

2005

Name of
Companies:

Period SLICO^ Marine

&

Genera

l

Trans

world

MAGIC Aureol IIC NIC RITCORP Industry

Averag

e

Expense ratio 2005 23% 33% 14% 15% 51% 32% 48% 32% 32%
2004 45% 15% 62% 53% 124% 50% 33% 55%
Return on Equity % 2005 - 19% 23% 30% 32% 23% 6% 8% 31% 22%
2004 14% - 4% - 22% 22% - 311% 8% 68% 28%
Outstanding premium as a % of
Gr. Premiums

2005 23% 9% 0% 0% 31% 54% 46% 31% 24%

2004 14% 0% 35% 18% 12% 44% 37% 23%
Investment Income as a % of
Total Investment

2005 0% 6% 7% 4% 8% 9% 17% 10% 8%

2004 4% 2% 4% 13% 19% 18% 9% 10%
Gross premium to equity ratio 2005 1.34 1.86 2.79 1.54 2.03 2.03 0.79 0.91 1.
2004 1.52 2.46 0.46 2.13 3.48 0.89 2.89 1.
Capital to liabilities Ratio
(Leverage)

2005 1.13 1.40 0.68 1.72 0.42 0.33 1.22 1.08 0.

2004 1.24 0.65 2.34 0.57 0.81 1.05 0.50 1.