Page 25 - Financial Statement Analysis

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C HAP TE R O N E

1 OVERVIEW OF FINANCIAL

STATEMENT ANALYSIS

ANAL YSIS OBJECTIVES

A LOOK AT THIS CHAPTER
Explain business analysis and its relation to financial statement
We begin our analysis of financial
analysis.
statements by considering its
relevance in the broader context of Identify and discuss different types of business analysis.
business analysis. We use Colgate
Describe component analyses that constitute business analysis.
Palmolive Co. as an example to help us
illustrate the importance of assessing Explain business activities and their relation to financial
financial performance in light of statements.
industry and economic conditions.
Describe the purpose of each financial statement and linkages
This leads us to focus on financial
between them.
statement users, their information
needs, and how financial statement Identify the relevant analysis information beyond financial
analysis addresses those needs. We statements.
describe major types of business
activities and how they are reflected Analyze and interpret financial statements as a preview to more
detailed analyses.
in financial statements. A preliminary
financial analysis illustrates these
Apply several basic financial statement analysis techniques.
important concepts.
Define and formulate some basic valuation models.
A LOOK AHEAD >
Explain the purpose of financial statement analysis in an
Chapter 2 describes the financial
efficient market.
reporting environment and the
information included in financial
statements. Chapters 3 through 6
deal with accounting analysis, which
is the task of analyzing, adjusting,
and interpreting accounting numbers
that make up financial statements.
Chapters 7 through 11 focus on
mastering the tools of financial
statement analysis and valuation.
A comprehensive financial statement
analysis follows Chapter 11.
2