Transcription of Introduction to Financial Statement Analysis
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Introduction to Financial Statement Analysis
Learning Objectives5chapterIntroduction to FinancialStatement Analysis1 Explain the purposeof Financial the rela-tionships between finan-cial Statement numbersand use ratios in analyz-ing and describing a com-pany s common-size fi-nancial statements to per-form comparison offinancial statements acrossyears and between theDuPont framework andhow return on equity canbe decomposed into itsprofitability, efficiency,and leverage cash flow infor-mation to evaluate cashflow the limita-tions of Financial studying this chapter, youshould be able to: 2003 Getty 11/13/03 7:39 PM Page 202In 1987, IBMwas the most valuable company in theworld, worth an estimated $ billion. By the endof 1992, IBM had an estimated value of $ decline in value can be traced to a strategic errormade by IBM in the early 1980s.
Whereas management uses the analysis to help in making operating, investing, and financing decisions, investors and creditors analyze financial statements to decide whether to invest in, or loan money to, a company. In analyzing a company’s financial statements, merely computing a list of financial ratios is not enough.
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