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

Learning Outcome Statements

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

CFA® 2020 Level I Curriculum, 2020, Volume 3, Reading 19

User Contributed Comments 5

User Comment
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
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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz

Tamara Schultz

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