TechStockTradeMastering Financial Statement Analysis
by Marco
Jun 22, 2025
Views: 951
Q1. Why is financial statement analysis important?
A. It helps assess whether a company can earn returns greater than its cost of capital, grow sustainably, and meet its financial obligations. Both equity and debt investors rely on this analysis to make buy/sell decisions and evaluate risk.
Q2. What are the key steps in the financial statement analysis framework?
A. The framework typically includes:
- Define the purpose of the analysis
- Collect data from financial reports and other sources
- Process and analyze the data
- Interpret results and communicate findings
Q3. What are the main sources of information used by analysts?
A.
- Annual and interim reports
- Audit reports
- Footnotes and supplementary schedules
- Management commentary
- Regulatory filings (e.g., SEC in the U.S.)
Q4. What’s the difference between IFRS and US GAAP?
A. IFRS is issued by the International Accounting Standards Board (IASB), and US GAAP is issued by the Financial Accounting Standards Board (FASB). While convergence efforts are ongoing, significant differences remain and must be considered in cross-border analysis.
Q5. What additional sources of information do analysts use beyond financial reports?
A.
- Industry whitepapers and analyst reports
- Government economic data
- Company websites, investor events, press releases
- Conversations with management or investor relations
- Surveys, interviews, and even product reviews
Q6. What is the primary goal of financial statement analysis?
A. To form expectations about a company’s future performance, financial position, and risk profile—enabling better investment, credit, and business decisions.
