Valuation Glossary

Financial statement analysis is the process of reviewing and evaluating a company’s financial statements to gain an understanding of its financial health and performance.

Financial risk refers to the possibility of losing money or facing negative consequences in financial matters. It arises from factors like market changes, economic downturns, credit problems, currency fluctuations, and regulatory changes. Financial risk can affect a company's profits, cash flow, and overall financial stability. It includes risks related to market conditions, credit defaults, cash availability, operational issues, and compliance with regulations. To manage financial risk, companies assess potential risks, use strategies like diversification and insurance, and stay informed about market conditions.

A fairness opinion is an assessment provided by an independent expert about whether a proposed financial transaction is fair. It helps the parties involved, such as the board of directors or shareholders, make informed decisions. The opinion considers factors like the financial terms, market conditions, and the value of the company or assets involved. It is presented in a written report and provides an unbiased analysis of the transaction's fairness. However, it doesn't guarantee the transaction's success.

Fair Value Through Profit and Loss (FVTPL) is an accounting classification for certain financial assets and liabilities. Under this method, changes in the fair value of these assets and liabilities are recognized directly in the profit and loss statement as they occur.

Fair Value Through Other Comprehensive Income (FVOCI) is a classification for certain financial assets under the International Financial Reporting Standards (IFRS). When an asset is designated as FVOCI, any changes in its fair value are recorded in "Other Comprehensive Income" (OCI) rather than directly in the profit and loss statement.