FINANCIAL STATEMENT ANALYSIS (role (audit reports (opinion (unqualified…
FINANCIAL STATEMENT ANALYSIS
financial statement analys
isuse the information in a company’s financial
statements, along with other relevant information, to make economic decisions
financial position at a point in time.
are the resources controlled by the firm.
are amounts owed to lenders and other creditors.
is the residual interest in the net assets of an entity that remains after
deducting its liabilities.
revenues, expenses, and gains and losses.
U.S. GAAP except that firms can choose to report comprehensive income in the statement of
statement of changes in equity
reports the amounts and sources of changes in equity investors’
investment in the firm over a period of time.
statement of cash flows
Operating cash flows
include the cash effects of transactions that involve the normal
business of the firm.
Investing cash flows
are those resulting from the acquisition or sale of property, plant, and
equipment; of a subsidiary or segment; of securities; and of investments in other firms.
Financing cash flows
are those resulting from issuance or retirement of the firm’s debt and
equity securities and include dividends paid to stockholders.
provide further details about the
information summarized in the financial statements
Discuss the basis of presentation such as the fiscal period covered by the statements and the
inclusion of consolidated entities.
Provide information about
accounting methods, assumptions
, and estimates used by
auditor performed an
that the financial statements contain
no material errors
The auditor’s report must also contain
when accounting methods
have not been used consistently between periods.
The auditor’s opinion will also contain an explanatory paragraph when a material loss is probable but
the amount cannot be reasonably estimated.
responsibility of management
U.S. GAAP auditor must express an opinion on the firm’s internal controls
The objective of audits of financial statements is to provide an opinion on the statements’
typically update the major financial statements and
footnotes but are not necessarily audited.
acquisitions and disposals of major assets or changes in its
management or corporate governance.
annual financial statements
annual financial statements.
are issued to shareholders when there are matters that require a shareholder
vote. about the election of (and qualifications of) board members, compensation,
management qualifications, and the issuance of stock options.
Step 1: State the objective and context.
Step 2: Gather data.
Step 3: Process the data.
Step 4: Analyze and interpret the data.
Step 5: Report the conclusions or recommendations.
Step 6: Update the analysis.