The financial statement analysis framework provides steps that can be followed in any financial statement analysis project, including the following:
What is the purpose of the analysis? Evaluating an equity or debt investment? Or issuing a credit rating?
The context needs to be defined clearly too: Who is the intended audience? What is the nature and content of the final report? What is the time frame? What is the budget?
Gather a company's financial data from financial statements and other sources described in Subject c (other financial information sources). Also gather information on the economy and industry to understand the environment in which the company operates.
Compute ratios or growth rates, prepare common-size financial statements, create charts, perform statistical analyses, make adjustments to financial statements, etc.
Interpret the output to support a conclusion (e.g., a buy decision).
Communicate the conclusion or recommendation in an appropriate format.
Periodic review is required to determine if the original conclusions and recommendations are still valid.
| MRSLETS: 1.Purpose|
|dhool: Gud 1 thanx buddy|
|leon121: i was thinking like apiccion! But i appreciate the "r" in there. less awkward without the "r"|
|Dsteth: Purpose, collect, process, analyze, conclusion, follow up|