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Subject 1. A Financial Statement Analysis Framework PDF Download
According to the framework there are six phases:

  • Define the purpose and context of the analysis. The purpose can be evaluating equity/debt investment, issuing a credit rating, etc.

  • Collect input data. The sources include financial statements, footnotes, supplementary schedules, MD&A, company web sites, press releases, etc.

  • Process input data. Make necessary adjustments, calculate ratios, prepare common-size statements, etc.

  • Analyze / interpret the data. A financial statement does not prove useful unless interpreted correctly.

  • Draw conclusions and prepare presentations. Examples are analytical reports and recommendations.

  • Follow up. Are there any changes / recent updates?

Learning Outcome Statements

demonstrate the use of a framework for the analysis of financial statements, given a particular problem, question, or purpose (e.g., valuing equity based on comparables, critiquing a credit rating, obtaining a comprehensive picture of financial leverage, evaluating the perspectives given in management's discussion of financial results);

CFA® 2023 Level II Curriculum, Volume 2, Module 16

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