BOLIVARIAN REPUBLIC OF VENEZUELA

MINISTRY OF POPULAR POWER FOR UNIVERSITARY EDUCATION

NATIONAL PROGRAM OF ADMINISTRATION TRAINING

UNIVERSITY INSTITUTE OF TECHNOLOGY OF THE LLANOS

VALLE DE LA PASCUA–STATE- GUARICO

TEACHER: MEMBERS:

MABEL VILLEGAS JULIANNY MARTINEZ

ADDRELAIN VEGA

FRANKLIN URBINA

PADRON ROSSIMAR

ALVAREZ DUBIS

MAY 2013
 Introduction

One of the fundamental limitations presented by theadministrationin

manyorganizationsthey are not evaluated early enough
consequences that different decisions will have on your situation
economic and financial.

This panoramasamplethe necessity of to apply

themethodsytechniquesdel financial analysis that combined with the degree of autonomy
what organizations should be gaining will enable managers to achieve
agile economic controls aimed at facilitating decision-making and having
a more efficient administration.

The importance ofanalysisit goes beyond what is desired by theaddressyes

that with the results it facilitates yourinformationfor the diverse users.

The financial executive becomes a decision-maker regarding aspects such as

how: where to obtain theresourceswhat to invest in, what are the benefits or
utilities of thecompanies,when and how should one pay thesources of
[Link], it uses various techniques and financial instruments such as
such as: Financial ratios, Pro-forma financial statements, Conversion cycle
of cash, Point ofbalanceDegree of operating leverage andCapitalof
work, among others, that are useful for decision-making.
Definition of financial instruments

A financial instrument is a contract that simultaneously gives rise to

a financial asset for a company and a financial liability or instrument of
capital in another company (NIC 32.11). This definition highlights the relationship
bilateral which involves any financial instrument, as it involves two parties in a way
simultaneous, and also highlights the need to combine the
accounting that takes place in both parties involved in it, for
ensure maximum coherence.

Examples of financial instruments are shares, ordinary or

preferred shares, which constitute the capital of a company; the obligations, whether they are

simple or convertible; the bonds or notes issued by the State and acquired
by the companies; the loans that a company grants to the companies of its
group or its workers; the accounts receivable from customers and even the
cash held in hand or in bank current accounts.

The vast majority of these financial instruments are assets

financial for the company that has acquired them, while for the company
that they have issued are financial liabilities, if they entail payment obligations, or
well, they are components of net equity (that is, capital instruments).

Although the terminology may seem familiar, the concepts that underlie it
they are not so much the same, which is why it is advisable to focus on the definitions of assets

financial, financial liabilities and capital instruments, as a preliminary step to their

accounting treatment.

Financial assets

They are assets that generically grant the company the right to receive
cash or other financial assets, although they are sometimes settled by offsetting
financial liabilities. For example, a share gives the right, among other things, to
receive dividends, shares freed in capital increases and the part
share of the net assets in case of liquidation of the issuing entity. A
A receivable from a client entitles one to receive cash or to be compensated, if
Such an agreement exists, with accounts payable that represent debts with it.
client.

TABLE I

Definition and examples of assets

Definition Examples
An asset is a
controlled resource They are assets:
for a machine in
the company as operation
result normally
events ready stocks
past, for its sale
company expects a • action
Obtain, in the listed company
future benefits
economic.
They are not assets:

the expenses of
constitution
the expenses of
basic research
an action of a
company yes
missing
It is important to realize that the interpretation of the definition of an asset
it must be done in a bidirectional manner: all items recognized in the asset
They must meet the three conditions, and all the situations in which it is seen.
the company, if they meet the stated conditions, must be
recognized as assets.
The forms that a financial asset can take are as follows:

effective, that is, financial instruments capable of settling debts;

(b) a capital instrument of another company, such as shares or the

participations in the capital of other entities;

(c) a contractual right to receive cash or another financial asset, such as may
be the bank accounts, the accounts receivable, the collection rights in favor of
lessor in a financial lease, the loans generated by the
company or state bonds, or a contractual right to exchange
financial instruments with another company, under conditions that are
potentially favorable, such as subscription rights of
actions or other types of options that allow the acquisition of financial instruments if
the price is favorable at the time of the exercise;

a contract that will or may be settled with equity instruments of the

entity, whether it is a non-derivative instrument that gives the entity the right to receive
a variable number of its equity instruments or a derivative instrument that
the entity is obliged to liquidate differently than by exchanging cash or another
financial asset for a fixed number of equity instruments of the entity.

As can be seen from the previous classification, treasury shares are not
financial assets (are part of net worth, and therefore are instruments
of capital), while the financial derivatives that, due to their situation, comply
the conditions to be active and can be reliably evaluated, constitute
financial assets.

Financial liabilities

Financial liabilities are commitments that involve an obligation.

contractual to deliver cash or another financial asset, or to exchange
financial instruments with another company, under conditions that are
potentially unfavorable. For example, an account payable to a supplier
it entails an obligation to deliver cash within a specified period, of the
the same way as the issuance of bonds implies a debt that must be
cancel on the date set in the issuance conditions.

TABLE II

Definition and examples of liabilities

Definition Examples
A liability is a
present obligation Their liabilities:
from the company, • the accounts to
arising from paying the a
events suppliers
past all interests
expiration of the accrued of the
which, and loans
to cancel it, the • the debts for
company wait for guarantees of
detach of products
resources that Sold
incorporate
benefits
economic.
They are not liabilities.

the debts that

depend on the
existence and amount
of the profits of
period
the provisions for
repairs
extraordinary
 (as long as it does not)

haya
produced the
repair
the debts that are
they cancel with

actions of the
own company
When the obligation incurred by the company must be settled
delivering shares or other capital instruments issued by the company, and
in no case can it be canceled by the delivery of cash or other assets
or financial liabilities, a financial liability is not created.

The forms that a financial liability can take, therefore, are:

a) a contractual obligation to deliver cash or another financial asset to another party

entity, or to exchange financial assets or financial liabilities with another
entity in unfavorable conditions, or

a contract that will be or may be settled with capital instruments of the

entity, whether it is a non-derivative instrument that gives the entity the obligation to
to deliver a variable number of its equity instruments, or one instrument
derived from the entity being required to liquidate differently than
exchanging cash or another financial asset for a fixed number of instruments of
capital of the entity.

Like financial assets, the ability to evaluate in a

The financial liability is essential for its recognition in the balance sheet.
of the situation. There are liabilities that, because they cannot be valued, are not recognized in the

balance, rather it describes its existence and conditions in a note to the

financial statements.

In the case of accounts payable to suppliers, the value will be the amount.
invoiced, if they are issued obligations, the amortized cost will be used.
the matter in question, whether it concerns provisions for guarantees on sold products
a probabilistic estimation of the disbursements to be made will be carried out, and if it is about

a long-term debt will be evaluated by the discounted amount of the cash flows
cash that is expected to be in the future.

Capital instruments

Capital instruments are represented by any contract

that highlights interests in the net assets of a company, once
liabilities have been deducted. Therefore, they are instruments that represent
participation in the entity's equity.

They are capital instruments the shares of the company itself, whether...
ordinary or include some type of preferential condition, but also all the
derivative instruments from these stocks such as options contracts or
future, as long as they can only be settled with the delivery of shares
and other equity instruments of the company.

Financial assets and their classification

Although a generic definition of financial assets has been provided, and

Commented on the conditions for their recognition, the accounting treatment of the
essentially depends on the purpose for which they were acquired
be maintained by the entity, a criterion used by IAS 39.

The classification that will be given below is one of the possible ones, but
the criteria used in it relates to the entity's intention with
relationship to the corresponding financial instrument, which determines the form of
evaluate and inform about it. There are other classifications that are much more
objectives (for example, one could have talked about fixed income portfolio and income
variable; or a principal instruments portfolio and derivatives portfolio), but
they have very little significance because they do not meet the criteria that one
they manage in the management of the company. Therefore, the classification that is going to

describe here is directly inspired by management practices in

relationship with the acquisition, possession, and sale of financial instruments
corresponding.

IAS 39.9 distinguishes four categories of financial assets:

1) Assets held for trading, which are the items that have been
acquired for the main purpose of generating a profit derived from the
short-term value fluctuations or the commission of intermediation. The case
the most common of this type of assets may be that of publicly traded securities,
but it is necessary for the company to have them for the purpose of selling them to
take advantage of the profitability achieved by them. All the
derivative financial instruments belong to this category of assets, except
to carry out a coverage mission, for being explicitly indicated as
such. The most important piece of information that management and users want to know, in
this type of transactions, it is the value for which they can be carried out (fair value) and
the variation that it has experienced over time, since one and the other
determine the likely behavior of the company and its profit.

2) Loans (granted) and receivables: are financial assets not

derivatives that are not traded in active markets, nor are they held for sale
they are available for eventual resale. The company generally
acquire these assets in exchange for supplying money, goods or services
directly to the debtor, and maintains the corresponding collection rights until
the expiration.

Examples of this type of accounts are customer accounts or receivables.

accounts receivable, for companies that sell goods or provide services, or
Well, the loans granted in the case of financial entities, as long as
the entity does not have them for their subsequent transfer. The most important data of this

type of investments is constituted by recoverable value at each moment, thus

like the changes that it experiences, which may depend on factors
such as the period that elapses until maturity or the conditions of
solvency of the debtor.
Investments held to maturity, which are financial assets
whose charges are fixed or determinable and whose due date is set on the
time, that the entity has the effective intention and capacity to conserve until the
moment of refund.

Examples of investments held until maturity can be the

bonds or other state debt securities, or the representative securities of the
debt of companies that the entity has acquired for the purpose of
keep them until their reimbursement. The most important piece of information that management and the

users expect to obtain from this type of investments is formed by the cost of
acquisition and the possible accrued interests from the moment of purchase
(amortized cost), as well as those accrued in the current period, but also
it is important to know the level of recoverability of this value based on the
solvency conditions of the debtor.

4) Financial assets available for sale, which are financial assets

that do not belong to any of the previous categories, and are characterized
because the entity can dispose of them at any time, but not
it has a usual selling behavior of the same. Just like in the case
from the investments to negotiate, the fair value of these assets is the data
most important for the managers and users of accounting information. Without
embargo, the change experienced in value is not so important, although it is
the change in accumulated value since its acquisition is important because mere
Variation is not, by itself, a determinant of sales decisions.

Financial liabilities and their classification

The classification of financial liabilities is simpler than the one that has
commented on the assets, and distinguishes only between the categories of
liabilities that are held for trading and other liabilities of a character
financial

a) Financial liabilities held for trading: which, similarly to the

assets of the same category are the items that have been assumed with the
main purpose of generating a profit derived from value fluctuations
in the short term or from the intermediation commission. It is understood that derivatives
financial ones always belong to this category unless the conditions are met
conditions of hedge accounting, given that the vast majority of the
Accounting coverages are implemented through derivatives. As in the case of
the assets, the relevant information regarding this type of liabilities is their value
reasonable, as well as the changes experienced by it over time.

b) Other financial liabilities: those that do not meet the above conditions,
among those are the liabilities originated from the commercial activity of the
company, the issuance of debt securities, the loans and credits received from
financial institutions, the debts arising from leases
financial, etc. In this case, the relevant data for management and users
the information includes the amortized cost and, where applicable, the increases that
suffer the items due to the accumulating interests or
accruing in the value of them.

The risk and the change in value of financial instruments

All transactions with financial instruments, as described in

the previous sections imply that the entity is involved in an investment of
effective to obtain, in the future, a cash flow (from interests, dividends,
refunds and sales of financial assets and liabilities) which can be fixed or,
in the vast majority of cases, depending on the evolution of certain variables, in which
if the return on investment is uncertain at the present moment, what
it makes risk appear as a very significant component of performance of
financial instruments.

The identification of the types of risks existing in an instrument

financial is very important for its management, as well as for the
classification and the accounting information to be disclosed, so that users
have a complete idea of the situation in which the investments are
and the financing of the entity. On the other hand, if it is desired to neutralize the presence
the risk in a financial instrument, through a hedging operation, is
It is necessary to identify what type of risk needs to be covered.

Although the following is not an exhaustive list, it aims to reflect the

main types of risks faced by instrument management
financial (NIC 32.52):

Market risk: possibility that market prices may fluctuate

financial instrument. Three types of price risk are usually distinguished,
they affect financial instruments in different ways. Thus, the value risk
reasonable due to the interest rate affects all instruments whose price in
the market depends on the prevailing interest rate at each moment, the interest rate risk
of change affects all instruments that are expressed (denominated)
in a currency different from that of the company's financial statements and the risk
of price, which affects the shares and other derivative instruments of the same,
is related to the variation that the price may experience of
instrument in the market, whether as a consequence of economic evolution
general, as an effect of the evolution of the entity. All these risks can
produce losses or gains, and they relate to both financial assets as well
with financial liabilities.

Credit risk: possibility that one of the parties in the contract does not comply
his contractual obligations, resulting in a loss in the remaining ones. In this
since the risk is usually of loss, and is often related to assets
financial. It can also be referred to as credit risk or counterparty risk.

Liquidity risk: the possibility that the company does not obtain in time the
sufficient funds to meet its debt payment obligations, which allows it
it will normally incur losses (the cause could be, for example, that it has to
liquidate certain assets below their fair value to obtain liquidity
sufficient). It affects financial liabilities.
Cash flow risk due to interest rates: possibility that the
future flows of a financial instrument may fluctuate due to interest rates
of market interest, for example when instruments are contracted with
variable interest rates based on some type of reference.

The management of risks present in a financial instrument implies that the

entity needs to identify them and try to minimize those that are most
significant. For this mission, you can use diversification techniques of
risk (for example, the exchange rate risk can be reduced by spreading the
investments between different types of currencies whose changes have a
opposite behavior in the market) or to financial derivatives (due to
For example, the cash flow to be received from a customer can be fixed in currency.
foreigner selling on credit or in the future the amount derived from it by a
fixed amount of euros.

Derivative financial instruments

Like many other economic institutions, the instruments

financial derivatives are the product of daily practice
from the business world, which has then tried to be systematized by
the financial theorists or theorists. In most cases, the
financial derivatives arise as a logical consequence of the evolution of the
financial or commodity markets.

For example, if there is an active citrus market, it is very likely that

a parallel market of citrus options develops (due to
example, the usual signal prior to the formalization of a contract is a case of
option) or forward contracts (for example, for those who want to secure the
possession of oranges on a specific date and at a specific price) or futures that
take the main market as a reference.

The most important characteristic that defines, from the point of view
accountable, to the derivatives, is that in most cases they can be
valued reliably, because they are quoted in the organized market or
so that valuation techniques can be applied based on the flows of
expected cash flows from instruments and other observable variables (interest rates
interest, volatility, etc.), can yield evaluations that serve as a basis for the
accounting for them as financial assets and liabilities.

Implicit derivatives

Derivatives can be presented in isolated contracts, as in the

cases that have just been described, or as part of other contracts
main ones. In such cases, they are called implicit derivatives, and their identification has
importance for accounting purposes because if there is no relationship between the characteristics

The economic aspects of the main contract and the derivative must be dealt with separately.
in the financial statements.
 Conclusions

1-. With the application of financial analysis instruments in companies, it ...

you can assess the financial position and in correspondence with the results
tracestrategieswith theobjectiveto improve them or otherwise take measures
to avoid falling into an unfavorable situation.

The basic objective is to determine, in the best possible way, an estimate of the
situation and future results.

3-They serve at the businessmanas a tool to get ahead of the future and prepare
for him, he will teach him to contemplate it not only with the eyes of his desires, but also

withrealismand forecasting.

They regulate the functioning of the company from period to period.

They continuously monitor the pulse of the company, which allows for
administration implementprogramscorrective actions as soon as they arise
symptoms ofproblemsfutures.

They serve as an objective exam that is used as a starting point for

provide reference regarding the facts concerning a company.
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