BUS 251 Chapter Notes - Chapter 12: Financial Statement Analysis, Inventory Turnover, Financial Statement

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 251
• Professor: Susan Bubra

Document Summary

Financial statement analysis = process of evaluating company"s performance based on analysis of financial statements. Provides signals about financial health, cash flows, operating efficiency. Steps: determine purpose & context of analysis. Which questions will this analysis answer: collect info needed for analysis, prepare common-size analysis & calculate ratios/other metrics, analyze & interpret metrics from step 3, dvlp conclusions & recommendations. In md&a, management discusses many aspects of company"s financial performance in greater detail. Past results, expectations for future & risks company is facing. Objective: allow user to see company thru eyes of management. Auditor"s report provides opinion of external auditor appointed by company"s bod regarding whether company"s financial results fairly presented. Prospective analysis = analyst trying to determine what future results of company may be, forward- looking. Retrospective analysis = extent to which analyst expects future to follow past trends, historical, basis for predicting future outcomes.