BU283 Study Guide - Final Guide: Yield Curve, Credit Risk, Cash Flow
Document Summary
Financial analysis: is the process of using financial information to assist in investment and financial decision making. Investments = investments paid for with debt + investments paid for with equity. Tells us how the firm has performed over a period of time. Identify company weaknesses: by identifying problems early managers can make corrections to improve firm performance. Identify company strengths: strengths can be enhanced and used to their greatest potential. Is the comparison of one firm to other similar firms: there are no good guidelines for picking comparison numbers for firms that are in multiple industries. Time-series analysis: e(cid:448)aluati(cid:374)g the fi(cid:396)(cid:373)"s fi(cid:374)a(cid:374)(cid:272)ial pe(cid:396)fo(cid:396)(cid:373)a(cid:374)(cid:272)e o(cid:448)e(cid:396) ti(cid:373)e utilizi(cid:374)g fi(cid:374)a(cid:374)(cid:272)ial (cid:396)atio a(cid:374)al(cid:455)sis. Both cross-sectional analysis and time-series analysis raise red flags that inspire the analyst to investigate specific figures from the financial statements in greater detail. Profitability ratios: measure how effectively the firm uses its resources to generate income.
