The financial statement analysis framework provides steps that can be followed in any financial statement analysis project, including the following:

• Articulate the purpose and context of the analysis.
  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?

• Collect input data.
  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.

• Process data.
  Compute ratios or growth rates, prepare common-size financial statements, create charts, perform statistical analyses, make adjustments to financial statements, etc.

• Analyze / interpret the processed data.
  Interpret the output to support a conclusion (e.g., a buy decision).

• Develop and communicate conclusions and recommendations.
  Communicate the conclusion or recommendation in an appropriate format.

• Follow up.
  Periodic review is required to determine if the original conclusions and recommendations are still valid.

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