30
company profit. If economic growth of a country is low, generally achieved profit of a company also low. In economic
analysis many variables has macro characteristic like: national income, monetary policy and fiscal, interest rate and etc.
b. Industry Analysis
In Industry analysis we have to know the strengths and weaknesses of relevant economy. Adequate knowledge about
industry dynamic from relevant company will help analyst or investor in doing industry analysis. The referred of company
analysis is group of homogenous company.
c. Company analysis issuer
The proposed company analysis to knowing the company performance. Investor needs relevant information about company as
a basic invest decision. That information include external and internal information of a company, which are information about
financial period in a certain period. Besides, solvency can be analyzed, profitability and liquidity of a company. Other important
information is expected information about financial projection or forecasting. Reminds that information necessity based on
consideration that stock price determined by past company performance or future expectation.
31
6. Financial Ratios
According to
Chunhui Liu and Grace O’Farrell 2009;5
Ratio analysis is an integral part of the analysis of financial statements, which
is a critical step before makin g any foreign investment Reuvid Li, 2000, because it quantifies a company’s performance in many aspects
such as the company’s ability to make a profit profitability, ability to pay off debts due within a year liquidity, ability to pay off debts due
after a year solvency or stability, and the ability to manage financial resources activity or efficiency.
According to Mas’ud Machfoedz 1994;12 there are nine financial ratios those can be used to predict future profit significantly.
Those nine ratios are:
a. Cash flow to current liabilities
Is a measurement of a company’s ability to cover current liabilities. A value of one would indicate the company can cover its
current liabilities with cash flow and as a “rule of thumb” a value of one over desired. If the operation cash flow to current liabilities
ratio keeps increasing, it may indicate the cash inflows are increasing and needs to be invested. The operation of cash flow to
current liabilities ratio is included in the financial statement ratio
