Financial Statement Analysis for Business Entities Essay

Exclusively available on Available only on IvyPanda® Made by Human No AI

Financial statements are important since they represent a business entity. They comprise “income statement, balance sheet, statement of earnings, statement of changes in financial position, and the cash flow statement” (Siddiqui, 2014, para. 4). Thus, they reflect such aspects as the financial position, business entity’s performance, or alterations in its financial position during the reported period. Financial statements make a useful source of information for the stakeholders interested in a business entity because they need some grounds to make financial decisions. Financial statements’ analysis can be interesting for investors, creditors, company management, and regulatory authorities (“Financial statement analysis,” 2017).

Financial analysis helps to reveal the existing strengths and weaknesses of a company (Siddiqui, 2014). The study of the financial statement allows making conclusions about the efficiency, profitability, and liquidity solvency of a business entity. Moreover, analysis of recent financial statements for a definite period of time can be used to forecast the future performance of a business entity (Brigham & Ehrhardt, 2014). However, it is important to consider macro- and microeconomic factors that would influence the performance of a company. Frequently, ratios are used to present a company’s performance. The major general groups of ratios used in financial statement analysis include liquidity, activity, leverage, and profitability ratios (“Financial statement analysis,” 2017).

Still, some problems can possibly appear during financial statement analysis. First of all, they deal with comparability between financial periods. A problem can appear in case the company changed its accounts, and some information for the previous periods is not available and thus cannot be compared. Secondly, there can be a problem in comparing different companies because they provide different ratios. On the whole, the financial statement is a useful document, but it should be created carefully and consider many significant factors.

References

Brigham, E.F., & Ehrhardt, M.C. (2014). Financial management: Theory & practice (14th ed.). Mason, OH: Cengage Learning.

(2017). Web.

Siddiqui, F. (2014).Web.

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2020, September 18). Financial Statement Analysis for Business Entities. https://ivypanda.com/essays/financial-statement-analysis-for-business-entities/

Work Cited

"Financial Statement Analysis for Business Entities." IvyPanda, 18 Sept. 2020, ivypanda.com/essays/financial-statement-analysis-for-business-entities/.

References

IvyPanda. (2020) 'Financial Statement Analysis for Business Entities'. 18 September.

References

IvyPanda. 2020. "Financial Statement Analysis for Business Entities." September 18, 2020. https://ivypanda.com/essays/financial-statement-analysis-for-business-entities/.

1. IvyPanda. "Financial Statement Analysis for Business Entities." September 18, 2020. https://ivypanda.com/essays/financial-statement-analysis-for-business-entities/.


Bibliography


IvyPanda. "Financial Statement Analysis for Business Entities." September 18, 2020. https://ivypanda.com/essays/financial-statement-analysis-for-business-entities/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1