"Financial statement analysis (or just financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions to earn income in the future."
The study of how to interpret and analyze financial statements to make decisions about a company's financial health and potential.
Financial statements: Provides an overview of the different types of financial statements, including balance sheet, income statement, and cash flow statement.
Accounting principles: Introduces the fundamental accounting principles and the Generally Accepted Accounting Principles (GAAP) used in financial statement analysis.
Financial ratios: Describes the different financial ratios used in analyzing financial statements, including liquidity, solvency, profitability, and efficiency ratios.
Income statement analysis: Covers the analysis of the income statement, including revenue, cost of goods sold, gross profit, operating expenses, and net income.
Balance sheet analysis: Discusses the analysis of the balance sheet, including assets, liabilities, and equity, and highlights the importance of accounting for depreciation, inventory, and accounts receivable.
Cash flow statement analysis: Covers the analysis of the cash flow statement, highlighting the importance of cash flow from operations, investing, and financing activities.
Financial forecasting and modeling: Provides an overview of financial forecasting and modeling techniques, including trend analysis, regression analysis, and time-series analysis, and how they apply to financial statement analysis.
Ratio analysis using industry benchmarks: Discusses the use of industry benchmarks to evaluate financial ratios and compare the performance of a company against its peers.
Financial statement footnotes: Highlights the importance of financial statement footnotes, which provide additional information about a company's accounting policies, significant accounting estimates, and potential risks.
Non-financial or qualitative factors: Discusses the importance of non-financial or qualitative factors, such as economic conditions, industry trends, competitive environment, and management quality, in financial statement analysis.
Horizontal Analysis: A method of comparing financial statements of a company over multiple periods to identify trends in financial performance.
Vertical Analysis: A method of analyzing financial statements by comparing line items to a base figure, such as total assets or revenue.
Ratio Analysis: Using ratios to analyze financial statements to determine a company's financial health and performance.
Liquidity Analysis: An analysis of a company's ability to meet its short-term obligations.
Solvency Analysis: An analysis of a company's ability to meet its long-term obligations.
Profitability Analysis: An analysis of a company's ability to generate profits and its overall financial strength.
DuPont Analysis: A method of analyzing a company's return on equity (ROE) by breaking it down into its component parts.
Common Size Analysis: A method of analyzing financial statements that presents information in percentage terms.
Cash Flow Analysis: An analysis of a company's cash inflows and outflows to determine its liquidity and financial health.
Comparative Analysis: An analysis of how a company compares to its competitors in terms of financial performance.
Forecasting Analysis: An analysis of a company's past financial performance to predict future trends and outcomes.
Trend Analysis: An analysis of a company's financial performance over time to identify patterns and trends.
Regression Analysis: A statistical method of analyzing financial data to identify relationships between variables.
Break-Even Analysis: An analysis of a company's sales volume required to cover its fixed and variable costs.
Industry Analysis: An analysis of a company's financial performance in relation to its industry.
"These statements include the income statement, balance sheet, statement of cash flows, notes to accounts, and a statement of changes in equity (if applicable)."
"It is used by a variety of stakeholders, such as credit and equity investors, the government, the public, and decision-makers within the organization."
"For example, equity investors are interested in the long-term earnings power of the organization and perhaps the sustainability and growth of dividend payments."
"Creditors want to ensure the interest and principal is paid on the organization's debt securities (e.g., bonds) when due."
"Common methods of financial statement analysis include horizontal and vertical analysis and the use of financial ratios."
"Historical information combined with a series of assumptions and adjustments to the financial information may be used to project future performance."
"The Chartered Financial Analyst designation is available for professional financial analysts."
"...analyzing a company's financial statements to make better economic decisions to earn income in the future."
"...credit and equity investors, the government, the public, and decision-makers within the organization."
"These statements include the income statement, balance sheet, statement of cash flows, notes to accounts, and a statement of changes in equity."
"Equity investors are interested in the long-term earnings power of the organization and perhaps the sustainability and growth of dividend payments."
"Creditors want to ensure the interest and principal is paid on the organization's debt securities (e.g., bonds) when due."
"The use of financial ratios."
"Historical information combined with a series of assumptions and adjustments to the financial information may be used to project future performance."
"The Chartered Financial Analyst designation is available for professional financial analysts."
"To make better economic decisions to earn income in the future."
"The income statement, balance sheet, statement of cash flows, notes to accounts, and a statement of changes in equity."
"Specific techniques for evaluating risks, performance, financial health, and future prospects of an organization."
"The government is one of the stakeholders who use financial statement analysis."