Financial Statement Analysis

Topics: Financial statements, Balance sheet / Pages: 3 (710 words) / Published: Jul 10th, 2013
I. RATIONALE

This report will be helping us understand financial statement analysis in a much broader way. It will also help us understand the implications of financial statement analysis to the management. This report will contribute additional knowledge on how to analyze the financial position of a company to determine if it is earning or losing.

II. OBJECTIVES

1. Know and explain the various ways financial statements are analyzed.

2. Know and explain the objectives of financial statement analyses.

3. Know and perform the steps in doing financial statement analyses by applying the different techniques, interpretations, conclusions, and draw the implications based on the results of the application.

III. KEYWORDS

Financial Statements Analysis – the process of understanding the risk and profitability of a firm (business, sub-business or project) through analysis of reported financial information, particularly annual and quarterly reports.

Horizontal Analysis – involves comparison of a financial ratio, a benchmark, or a line item over a number of accounting periods

Vertical Analysis – a method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a proportion of the total account.

IV. PRETEST

1. What are the objectives of financial statement analysis?

2. What issues limit financial statement analysis?

V. LEARNING CELLS

Introduction

Financial statement analysis (or financial analysis) is the process of understanding the risk and profitability of a firm through analysis of reported financial information, particularly annual and quarterly reports.

Objectives of Financial Statement Analyses

➢ Profitability – the ability of a firm to yield a sufficient amount of return on company sales assets and invested capital. ➢ Liquidity and Stability – the



Bibliography: Fundamentals of Financial Management (With Industry-Based Perspective), Anastacio, Ma. Flordeliza, 2010, Rex Bookstore ----------------------- Financial Statement Analyses and Their Implications to Management

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