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Accounting Notes Accounting (Special Edition) Notes

Final Accounts Analysis Application Notes

Updated Final Accounts Analysis Application Notes

Accounting (Special Edition) Notes

Accounting (Special Edition)

Approximately 126 pages

These notes are specially designed to meet the requirements of the accounting and financial reporting students internationally. These notes are equally relevant for all the regions of the world.

There are many easy and unique features included in the notes to understand and grasp the topic.

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There are many practice questions to understand how the concept is applied into practical scenarios.

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Final Accounts Analysis - Applications

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Definition

Financial Statement Analysis is the process of evaluating businesses to determine their suitability for investment.

In other words

Financial statement analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in. When looking at a specific company, the financial analyst will often focus on the income statement, balance sheet, and cash flow statement. In addition, one key area of financial analysis involves extrapolating the company's past performance into an estimate of the company's future performance.

Why is it important?

Financial Statement Analysis is helps in the decision making process such as evaluating past performance, projecting future performance, forecasting profits, forecasting cash flows, Investment screening etc.

Lecture Notes

Financial Statement Analysis

The application of the above can be found in different areas like:

  • evaluating past performance

  • projecting future performance

  • forecasting profits

  • credit assessment

  • credit scoring

  • forecasting cash flows

  • Investment screening

Evaluating Past Performance

Many things are highlighted under this like

  • the causes of change in key ratios

  • major aspects necessary for competitive advantage

  • business model and strategies

Projecting future performance

Future performance can be forecasted on the results from financial statement analysis like expected sales, GDP growth

Forecasting Profits

Future estimations about net profits can be calculated by using spreadsheet modeling and with the help of estimated interest rates and tax rates

Forecasting Cash flows

Same as profits, with the financial statement analysis cash flows can be forecasted

Credit assessment

As a user of financial statement, loan providers also analyses the company’s financial performance for credit assessment,

They observes the ability of the business to meet interest and principal repayment on schedule, further the cash flows forecast also helps in the credit assessment

Credit Rating

Credit rating agencies by using advanced formulas based on financial numbers issue credit ratings of the businesses

Equity screening

Performed by potential and...

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