Financial Statements & Analysis

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A company’s financial performance and its value to the market are two metrics that are measured by financial statement analysis. This method is practiced internally to keep tabs on and manage funds. The balance sheet, income statement, and statement of cash flows are the three primary documents used in FSA. Investors may obtain a more magnifying image of a company’s financial profile through the use of several approaches. There are typically 2 methods used by our analysts when analyzing a company’s financial accounts. Data from different time periods can be compared in a horizontal analysis. Vertical analysis is a method of analyzing financial statements that compares two or more columns of data. Ratio analysis compare both the vertical & horizontal data (equality analysis). 

The three reports (balance sheet, income statement, & cash flow statement) are linked and provide varying perspectives on a business’s operations and results. In-depth analysis of financial statements is a key part of an analyst’s job. The cash flow statement summarizes the operating, investing, & financing actions.

In order to assess a company’s profitability and stock price potential, an analyst may first examine a variety of ratios derived from the income statement. An excellent illustration of this is the gross profit margin, which reveals the gap between sales & production expenses. The company’s health may be indicated by a higher gross profit margin than its rivals. In the cash flow statement, net income is shown at the very top section. The bottom line reveals how much liquid assets a business has. There are three parts to a cash flow statement – profit & loss, a steady stream of cash, and the sources.