BSB110 Lecture Notes - Lecture 3: Financial Statement Analysis, Financial Statement, Financial Ratio
Document Summary
Accounting is a means of communicating relevant and reliable financial information about a reporting entity it its users. Financial statements include a wealth of information which is designed to communicate information about the entity to the users of financial reports. Every item in financial reports represents something important. Its significance can be determined only in relation to something else (single numbers on their own do not provide useful information) Most of the information contained in financial statements is expressed in monetary terms. Monetary amounts are important but not particularly useful for comparative purposes between entities. Dollar value comparisons are limiting as the current year"s profit needs to be compared with other information such as: The profits of other entities in the ame industries. The value of assets used to generate the profit. To overcome this, financial statement analysis is a technique used by analysts to achieve information useful for decision making including: Assessing the financial health of a business.
