BA 3340 Lecture Notes - Lecture 99: Financial Statement Analysis, Income Statement, Tax Shield
Document Summary
Financial statement analysis helps you iden1fy a company"s ability to create value for its shareholders (shareholder value). Shareholder value should be created such that it comply with shareholders" expecta1ons. Accrual-based performance measures or cash-3ow-based performance measures are used to forecast future performance and thereby shareholder value. However, it is debatable which performance measure best describe this. See p. 48-49 for an example on how accrual-based and cash-3ow-based earnings are generated. Cons (they both have shortcoming when measuring earnings capacity in the. Recognizes a transac1on at the 1me when a sale is made rather than when cash is received from the customer (unused purchases will at the end of the. Recognized when the sale is made within the period. The costs that match the above revenue/sale are recognized. Does not recognize a transac1on un1l cash has been received from the customer, i. e. when a transac1on results in an injow of cash.
