BU283 Chapter 2: Textbook Notes
Document Summary
Introduction: financial analysis is the process of using financial information to assist in investment and financial decision making, financial analysis helps managers with efficiency analysis and identification of problem areas within the firm. It helps managers identify strengths on which the firm should buy: financial analysis is useful for credit managers evaluating loan requests and investors considering security purchases. Learning objective 1: the financial statements: three financial statements are critical to financial statement analysis: the balance sheet, income statement and the statement of cash flows. The right hand side shows how the firm is financing its assets. The income statement: the income statement tells us how the firm has performed over a period of time, the first section reports the results of operating activities or operating incomes including. Income statements usually have 2 sections sales minus operating expenses: financing activities are reported in the 2nd section where interest expense, taxes and preferred dividends are subtracted to arrive at net income.
