Accountancy · Ch 5 — Analysis of Financial Statements
Introduction
Introduction
From Statements to Insight
The previous chapter covered a company's financial statements — the Statement of Profit and Loss and the Balance Sheet. These are, at their core, summarised financial reports that show a company's operating results and financial position. But the raw figures in these statements only become useful once they are properly analysed and interpreted to assess a company's operational efficiency and financial soundness.
Over time, financial experts have developed a number of specific techniques — or tools — for exactly this purpose.
This chapter gives an overview of these tools of financial statement analysis, building the foundation for the more specific techniques (accounting ratios, cash flow analysis) covered in the chapters that follow.