Financial Statement Analysis
Chapter 2
Introduction to Financial Statement Analysis
2-1. What are the four main financial statements? What checks are there on the accuracy of these statements?
The four financial statements are: the balance sheet, the income statement, the statement of cash flows, and the statement of changes in shareholders’ equity. Financial are required to be audited by a neutral third party, who checks and ensures that the financial statements are prepared according to GAAP or accounting standards and that the information contained is reliable.
2-2. Who reads financial statements? List at least three different categories of user. For each category, provide an example of the type of information they might be interested in and discuss why.
Users of financial statements include present and potential investors, financial analysts, and other interested outside parties (such as lenders, suppliers and other trade creditors, and customers). Financial managers within the firm also use the financial statements when making financial decisions.
Investors. Investors are concerned with the risk inherent in and return provided by their investments. Bondholders use the firm’s financial statements to assess the ability of the company to make its debt payments. Stockholders use the statements to assess the firm’s profitability and ability to make future dividend payments.
Financial analysts. Financial analysts gather financial information, analyze it, and make recommendations. They read financial statements to determine a firm’s value and project future earnings, so that they can provide guidance to businesses and individuals to help them with their investment decisions.
Managers. Managers use financial statement to look at trends in their own business, and to compare their own results with that of competitors.
2-3. Find the most recent financial statements for Starbucks’ corporation (SBUX) using the following sources:
a. From
Introduction to Financial Statement Analysis
2-1. What are the four main financial statements? What checks are there on the accuracy of these statements?
The four financial statements are: the balance sheet, the income statement, the statement of cash flows, and the statement of changes in shareholders’ equity. Financial are required to be audited by a neutral third party, who checks and ensures that the financial statements are prepared according to GAAP or accounting standards and that the information contained is reliable.
2-2. Who reads financial statements? List at least three different categories of user. For each category, provide an example of the type of information they might be interested in and discuss why.
Users of financial statements include present and potential investors, financial analysts, and other interested outside parties (such as lenders, suppliers and other trade creditors, and customers). Financial managers within the firm also use the financial statements when making financial decisions.
Investors. Investors are concerned with the risk inherent in and return provided by their investments. Bondholders use the firm’s financial statements to assess the ability of the company to make its debt payments. Stockholders use the statements to assess the firm’s profitability and ability to make future dividend payments.
Financial analysts. Financial analysts gather financial information, analyze it, and make recommendations. They read financial statements to determine a firm’s value and project future earnings, so that they can provide guidance to businesses and individuals to help them with their investment decisions.
Managers. Managers use financial statement to look at trends in their own business, and to compare their own results with that of competitors.
2-3. Find the most recent financial statements for Starbucks’ corporation (SBUX) using the following sources:
a. From