Thomas Warschauer, PhD, CFP®
San Diego State University
Many topics use financial statements as a basis for their analyses. For example, cash flow statements are necessary for insurance needs and retirement planning computations. Virtually all accumulation goals depend on funding based on either appropriating investment assets or allocating cash flow. An understanding of these funding sources is based on an analysis of these financial statements. Statements of financial position are necessary for investment analysis and determining appropriate financing strategies. Tax and estate evaluation also begin with an evaluation of the client’s financial statements. Evaluation of financial statements results in observed strengths and weaknesses of the client’s fiscal situation, which is discussed in Chapter 77.
Finance professionals agree that financial analysis virtually always begins with the construction and evaluation of financial statements. The construction of financial statements is an ancient art, although statements for business analysis are much more developed than those for individual or family analysis.
Financial planners need to be familiar with both corporate/business accounting techniques and individual financial statements. Given that the purpose of financial statements prepared by a financial planner is ...