2

Financial Statement Analysis

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Learning Objectives

By the end of this chapter, you should be able to:

•  Outline the priorities of the three primary groups with an interest in the company and its financial statements: creditors, investors, and management.

•  Describe the structure and content of the balance sheet and the income statement.

•  Describe the structure and content of the statement of stockholders’ equity and the statement of cash flows.

•  Define financial analysis and list its limitations.

•  Explain the role of ratio analysis in evaluating financial data.

•  Perform horizontal analysis.

•  Perform vertical analysis.

Digging Deeper ...

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