Accounts Demystified, 7th Edition

7

Financial analysis: Introduction

• The ultimate goal
• The two components of a company
• The general approach to financial analysis
• Wingate’s highlights
• Summary

Up to now, all our sessions have been about accounting. You should now be able to read the accounts of a small or medium-sized company and understand them. This does not mean, though, that the accounts tell you anything. That is where financial analysis comes in.

This weekend came about partly because Tom is worried about Wingate’s financial position. The managing director would have you believe that things are going pretty well for Wingate – sales, profits and dividends are all rising steadily. However, Tom’s perception is that the company is expansion crazy, cutting prices and giving ...