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This 2.5-page paper discusses the financial statement analysis process. Comments include why such an analysis is performed, how it is performed and the justification for it. Bibliography lists 1 source.
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2 pages (~225 words per page)
File: D0_MTfinany.rtf
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particular company. In analyzing everything from balance sheets to ratios, senior management, financial personnel and even investors end up with a pretty good idea of the financial health of a
company. Senior management can determine if changes need to be made in their way of doing business. Financial personnel can advise senior management. And such analysis provides information to investors
as to whether or not they should put their hard-earned cash into the company. In addition, a financial statement analysis tells those
who are interested what the future performance of a company will be (Roth, 2000). This is because most analysts will predict the future based on what past figures are (Roth,
2000). There are many ways to perform a financial statement analysis, but a true analysis is based on profits, which are the key to a companys long-term performance (Roth, 2000).
Without profits, a company cant invest in capital, cant repay loans and cant pay dividends (Roth, 2000). For this reason, much of the financial statement analysis is directed toward a
companys profits. But another important part of analysis involves debt levels - in other words, how much a company might owe for
borrowing money (Roth, 2000). When interest rates are low, it makes sense for a company to borrow to invest for growth - but when interest rates climb, too much debt
could be a problem for the company, and could impede its ability to repay its loans (Roth, 2000). Although investors and senior
managers study the analysis and figures, it is typically the CFO and his/her staff that actually performs such analysis. Most CFOs and
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