UNIT I: FINANCIAL STATEMENT ANALYSIS
INTRODUCTION
Companies use financial statements to record their asset investments, report their
profitability, and describe their cash flow. Analysts evaluate financial statements (often
called a company's "books") for clues about a company's performance. There are three types
of financial statements:
·
Balance Sheet
·
Income Statement
·
Cash Flow Statement
We include an overview of financial statement analysis in the Corporate Finance Workbook to
help you understand the terminology that is used by persons working in finance and to
introduce some calculations that will apply later in the course, particularly in the units that
discuss corporate valuation. For a more in-depth study, you can take the Citibank self-
instruction course on Financial Statement Analysis.
UNIT OBJECTIVES
When you complete this unit, you will be able to:
·
Recognize the three main types of financial statements
·
Identify the relationships between accounts on the Balance Sheet, line items on
the Income Statement, and the calculation of the Cash Flow Statement
·
Calculate common ratios used in financial statement analysis and interpret the
results