CHAPTER 8
FINANCIAL STATEMENT ANALYSIS: APPLICATIONS
LEARNING OUTCOMES
After completing this chapter, you will be able to do the following:
- Evaluate a company’s past financial performance and explain how a company’s strategy is reflected in past financial performance.
- Prepare a basic projection of a company’s future net income and cash flow.
- Describe the role of financial statement analysis in assessing the credit quality of a potential debt investment.
- Describe the use of financial statement analysis in screening for potential equity investments.
- Determine and justify appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company.
1. INTRODUCTION
This reading presents several important applications of financial statement analysis. Among the issues we will address are the following:
- What are the key questions to address in evaluating a company’s past financial performance?
- How can an analyst approach forecasting a company’s future net income and cash flow?
- How can financial statement analysis be used to evaluate the credit quality of a potential fixed-income investment?
- How can financial statement analysis be used to screen for potential equity investments?
- How can differences in accounting methods affect financial ratio comparisons ...
