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Financial Reporting: Financial Statement Analysis & Valuation
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Dmitry Babooshka
Dmitry Babooshka has been a professional business writer since 2000, with features, reviews, test drives and columns published in "The Moscow News," "The Moscow Times," "the eXile," "FHM," "CAR" and "Restaurant Business." He holds a Master of Business Administration from the University of British Columbia and has been a member of the International Federation of Journalists since 2003.
By Dmitry Babooshka, eHow Contributor
updated: January 23, 2011
Savvy readings of financial statements allow users to assess the financial position of a company, the success of its operations, and the policies and strategies of its management, all of which provide insight into future performance. In the analysis of financial statements, users can take the three most common approaches: comparison over time, comparison within the industry and/or the computation of key financial ratios. Detailed analysis of financial statements allows external users to make grounded investment or regulatory decisions, and management can find areas for further improvements.
Financial Statement Analysis
o Analysis of a financial statement can reveal the company's historical performance and compare it to its peers in the industry. It can also project future performance based on past and current information, and assess the company's investment and return potential. The four most common steps of this analysis would be assessing the business environment; reading and studying the financial statements and footnotes; assessing earnings quality; and predicting future earnings and/or cash flow.
Assess the Business Environment
o Information about the business