Financial Statement Analysis

Financial statement analysis is an integral and important part of a broader field of business analysis. Business analysis is the process of evaluating a company’s economic prospects and risks. This includes analyzing a company’s business environment, its strategies, and its financial position and performance.

Business analysis is useful in a wide range of business decisions such as whether to invest in equity or in debt securities, whether to extend credit through short or long term loans, how to value a business in an initial public offering (IPO), and how to evaluate restructurings including mergers, acquisitions, and divestitures.

Financial statement analysis is the application of analytical tools and techniques to general purpose financial statements and related data to derive estimates and inferences useful in business analysis. Financial statement analysis reduces reliance on hunches, guesses, and intuition for business decisions. It decreases the uncertainty of business analysis. It does not lessen the need for expert judgment but, instead, provides a systematic and effective basis for business analysis.

This subject’s content divided into 3 categories: Overview, Accounting Analysis and Financial Analysis.

A) Analysis Overview
1) Overview of Financial Statement Analysis
2) Financial Reporting and Analysis

B) Accounting Analysis
1) Analyzing Financing Activities
2) Analyzing Investing Activities
3) Analyzing Investing Activities: Intercorporate Investments
4) Analyzing Operating Activities

C) Financial Analysis
1) Cash Flow Analysis
2) Return on Invested Capital and Profitability Analysis
3) Prospective Analysis
4) Credit Analysis

5) Equity Analysis and Valuation