Financial Statement Analysis Please respond to the following

Financial Statement Analysis\" Please respond to the following: Evaluate at least (2) factors that make financial statement analysis essential to management, investors, and creditors. Provide a rationale for your response. Imagine you are considering investing in a corporation. Examine the key information you would look for in a company’s financial statements and explain why this information would be important to you. Suggest at least two (2) financial statement analysis tools you would use to evaluate this company’s financial statements. Provide a rationale for your suggestions. Reply Quote

Solution

Financial statement analysis is the process of analysing a Company\'s financial statements for decision-making purposes and to understand the overall health of an organization. Financial statement analysis involves gaining an understanding of an organization\'s financial situation by reviewing its financial statements. This review involves identifying the following factors that make financial statement analysis essential to management, investors, and creditors over a series of reporting periods:

1.) Profitability ratios. These ratios measure how well a company performs in generating a profit.

2.) Liquidity ratios. This is the most fundamentally important set of ratios, because they measure the ability of a company to remain in business.

The above information is helpful for an investor while investing his money in a Corporation. Investor wants to invest in that corporation where he can get maximise return for his investment. Therefore, Investor would like to invest his amount in that corporation which has higher profits and is able to pay its debts on time.

Tools for evaluating Company’s Financial Statements

With the help of tools we are able to present our data analysed above in better and clear way. Therefore, while evaluating company’s financial statements, we will use following tools to represent our analysis.