Introduction to Financial Statement Analysis

• Financial statement analysis: involves careful selection of data from financial statements in order to

  assess and evaluate the firm’s past performance, present condition, and future business potentials.
• Objectives of Financial Statement Analysis (Garrison, Noreen, & Brewer, 2018)

  The primary purpose is to evaluate and forecast the company’s financial condition. Interested

  parties, such as managers, investors, and creditors, can identify the company’s financial strengths and

  weaknesses and know about the following:

  • Profitability of the firm;

  • Solvency of the firm;

  • Safety of the investment in the business; and

  • Effectiveness of management in running the firm.