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ACC 305 Intermediate Accounting III

Accounting
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Suggest what key information you would look for in a company’s financial statements, and explain why this information is important to you.

Jun 11th, 2015
Financial  statement analysis is an extremely useful tool in understanding the  financial performance of any company. It allows you to determine a  business’s current position with regards to its commercial strengths  (e.g. Customer base) and weaknesses (e.g. Volatile costs). It also gives  an understanding of the key drivers of the business through multiple  factors. This can include strategic, economic aspects as well as  accounting and financial; all of which can tell strikingly different  stories. Being able to tell the overall story behind these numbers is an  invaluable tool not just for investors, but also people who run their  own businesses.

From an entrepreneurial perspective, having a  sound understanding of financial statement analysis can be crucial to  business success. Knowing your own financials, can be the quickest and  in many cases the most efficient way to pitch a business to investors.

I  recently produced a presentation on Pearson; the world’s largest  education company. I analysed the financial statements in depth, using  it to build a financial model. With the information from the financial  statement I was able to forecast its future prospects, and ultimately  create a valuation of the company. From there I was able to value  Pearson stock, and compare it to the current price with commentary.

So  you see, financial statements itself hold a lot of information that can  be used for multiple purposes. However, through my experience  understanding how to interpret the statements is where most people have  difficulty and therefore are not able to reap the full benefits.

Here  is a simple booklet designed by CFA alumni, teaching you how to read  the 4 main financial statements in less than 5 minutes: How to Read Financial Statements . It is designed to cater for people with any level of proficiency in  finance, whilst still being technical enough for academic students.


Jun 11th, 2015

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Jun 11th, 2015
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Jun 11th, 2015
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