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In: Finance

explain the purpose of financial statement analysis, describe the primary techniques used in financial statement analysis,...

explain the purpose of financial statement analysis, describe the primary techniques used in financial statement analysis, and finally, discuss the problems associated with financial statement analysis.

Solutions

Expert Solution

1.
Purpose: Examine past & current financial data to evaluate a company's performance & financial position and estimate all future risks & potential.
2.
fundamental analysis
DuPont analysis
horizontal analysis
vertical analysis
use of financial ratios
common size analaysis
3.
statements are prepared with time lag and hence current situation might be very different
ad-hoc transactions which might not repeat in future are included in statements
different accoutning polciies
historical values rather than current values on the balance sheet
No recommended/ideal values ​​for indicators
seasonality effect
quality factors not measurable-management,etc.
manipulation of statements-window dressing

jeff jeffy answered 2 years ago
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