Financial statement analysis|Legit essays

Posted: January 26th, 2023

Financial statement analysis focuses primarily on isolating information that is useful for making a particular decision. Through ratio analysis, users of financial data can analyze various relationships between items reported.

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Describe the 3 main categories of ratios and provide a specific example of a ratio that is used in each category. For each of the 3 ratios you selected, describe how it is used in managerial decision-making.

SOLUTION

Financial statement analysis is the process of reviewing and evaluating a company’s financial statements in order to make informed decisions. This analysis typically includes reviewing the income statement, balance sheet, and cash flow statement, in order to gain insight into a company’s financial performance, liquidity, and solvency. Financial statement analysis can be performed by investors, analysts, and other interested parties in order to make informed decisions about buying, holding, or selling a company’s stock. Additionally, financial statement analysis can also be used by management to make strategic decisions about the direction of the company.