Financial Statement Analysis (1)

        Financial reporting is the method a firm uses to convey its financial performance to the market. The role of Financial Statement Analysis is to use the information in company's financial statements along with other relevant information, to make economic decisions. Example of decisions, whether to invest in the company or recommend to investors or to extend trade or bank credit to the company.

****Balance Sheet

        The Balance Sheet reports the company's financial position at a specific point in time. It is made up of three parts; assets,liabilities and owners' equity.

assets = liabilities + owners' equity

****Statement of Comprehensive Income

        It shows the results of a firm's business activities over the period. Revenues, the cost of generatin those revenues, and the resulting profit or loss.

****Accounting

        Importing information about accounting method, asssumptions and estimates are disclosed in footnotes to financial statements and supplementary schedules.


Framework of a Financial Analysis has six steps;

        1-State the objective of analysis
        2-Gather data
        3-Process the data
        4-Analyze and interpret the data
        5-Report the conclusions and recommendations
        6-Update the analysis