Financial Statement Analysis

Financial Statement Analysis

Financial statements serve as a record of critical economic data related to a business’s activities. Every company creates and monitors three primary financial statements: balance sheet, income statement, and cash flow statement. These documents provide reporting transparency to show the value of a company to current and future stakeholders. The balance sheet is a report of a company’s financial worth in terms of value.

This is broken into three parts: assets, liabilities, and shareholders’ equity. The income statement shows the company’s revenues and expenses during a particular period indicating how the revenues are transformed into net income or net profit. The cash flow statement provides an overview of the company’s cash flows from operating, investing, and financing activities. This statement shows the bottom line of how much cash a company has available. These statements combined can be used to produce projected financial statements. Projected financial statements are income statements and balance sheets developed for future years to forecast the potential impacts of various recommendations proposed for implementation (David, David, & David, 2020). By projecting what your financial statements look like in the future or comparing them to past statements, a business can plan for the future. Before deciding to buy equipment, buildings, etc., the projected financial statements consider past economic trends and market conditions that can help you determine if now or later is the best time to make that decision.

Reference

David, F. R., David, F. R., & David, M. E. (2020). Strategic Management Concepts and Cases: A Competitive Advantage Approach (17th ed.). New York, NY: Pearson Education. ISBN-13: 9780135203699. Retrieved from: https://www.gcumedia.com/digital- resources/person/2019/strategic-management_a-competitive-advantage-approach-concepts- and-cases_17e.php

Kenton, W. (2020). Financial Statement Analysis. Retrieved 28 June 2020, from https://www.investopedia.com/terms/f/financial-statement-analysis.asp

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Financial Statement Analysis

How do you plan to use financial statements in your projected financial statement analysis? Provide a rationale for your approach.