Financial Statement Analysis

AAA

DEFINITION of 'Financial Statement Analysis'

The process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making. Financial statements record financial data; however, this information must be evaluated through financial statement analysis to become more useful to investors, shareholders, managers and other interested parties.

INVESTOPEDIA EXPLAINS 'Financial Statement Analysis'

Financial statement analysis is an evaluative method of determining the past, current and projected performance of a company. Several techniques are commonly used as part of financial statement analysis including horizontal analysis, which compares two or more years of financial data in both dollar and percentage form; vertical analysis, where each category of accounts on the balance sheet is shown as a percentage of the total account; and ratio analysis, which calculates statistical relationships between data.

RELATED TERMS
  1. Financial Statements

    Records that outline the financial activities of a business, ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  3. Annual Report

    1. An annual publication that public corporations must provide ...
  4. Income Statement

    A financial statement that measures a company's financial performance ...
  5. Profit and Loss Statement - P&L

    A financial statement that summarizes the revenues, costs and ...
  6. Inherent Risk

    The risk posed by an error or omission in a financial statement ...
Related Articles
  1. 12 Things You Need To Know About Financial ...
    Investing Basics

    12 Things You Need To Know About Financial ...

  2. Introduction To Fundamental Analysis
    Markets

    Introduction To Fundamental Analysis

  3. Advanced Financial Statement Analysis
    Options & Futures

    Advanced Financial Statement Analysis

  4. Variable Costs
    Investing

    Variable Costs

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center