Financial Reporting and Analysis I

Reading 19. Introduction to Financial Statement Analysis

Learning Outcome Statements

a. describe the roles of financial reporting and financial statement analysis;

CFA Curriculum, 2020, Volume 3

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Subject 1. The Roles of Financial Reporting and Financial Statement Analysis

The role of financial reporting is to provide information about a company's financial position and performance for use by parties both internal and external to the company. Financial statements are issued by management, who is responsible for their form and content.

The role of financial statement analysis, on the other hand, is to take these financial statements and other information to evaluate the company's past, current, and prospective financial position and performance for the purpose of making rational investment, credit, and similar decisions.

The primary users of financial statements are equity investors and creditors.

  • Equity investors are primarily interested in the company's long-term earning power, growth, and ability to pay dividends.
  • Short-term creditors (e.g., banks and trade creditors) are more interested in the company's immediate liquidity, because they seek an early payback of their investment.
  • Long-term creditors (e.g., corporate bond owners such as insurance companies and pension funds) are primarily concerned with the company's long-term asset position and earning power.

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BEBO10

I WOULD LIKE TO THANK YOU FOR THE GREAT EFFORT EXERTED.

DS12

What do you mean by that?

fmhp

And you DS 12 what do you mean by your question?

mary11

lets thank everyone after we pass.

jfermin315

thanks mary