Financial Statement Analysis

Financial information can be difficult to interpret, but for those who are responsible for an organization's activities, it can also be very beneficial. Written for business owners and managers, this book looks at various types of organizations that produce financial information and how to use that information effectively. Information that is publicly available for large organizations is discussed as well as how to select and analyze the numbers for decision making. Detailed management accounting information is available for managers specifically to help them make well-informed decisions, investigate problems, and set performance targets. Newer issues are explored as well, including having resources to stay in business and environmental concerns with the organization's activities. Chapter 3 builds on the previous chapter, going into greater detail about analysis of financial statements. Examples of financial statements from three companies in three different countries are offered. These examples show how to look at complex financial statements and find the figures needed to conduct an analysis. This chapter focuses on analyzing a company's profitability, liquidity, efficiency, and control of cash. How to conduct a sophisticated analysis is then explained. Calculating and analyzing ratios is discussed. To analyze ratios, comparisons are needed, which can be from the company's previous financial statements or statements from other companies; these ratios are useful in understanding an organization's financial performance and standing. Limitations of ratio analysis are also discussed.