Financial analysis is the process of evaluating businesses, projects, budgets and other finance-related entities to determine their performance and suitability. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid or profitable enough to warrant a monetary investment. When looking at a specific company, a financial analyst conducts analysis by focusing on the income statement, balance sheet, and cash flow statement.
Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. This is done through the synthesis of financial numbers and data.
One of the most common ways to analyze financial data is to calculate ratios from the data to compare against those of other companies or against the company’s own historical performance. This course is designed to prepare students to interpret and analyze financial statements for tasks such as credit and security analyses, lending and investment decisions, and other decisions that rely on financial data. This course explores in greater depth financial reporting from the perspective of financial statement users. Students develop a sufficient understanding of the concepts and recording procedures and therefore are able to interpret various disclosures in an informed manner. Students learn to compare companies financially, understand cash flow, and grasp basic profitability issues and risk analysis concepts. Ultimately, students who complete this course develop a more efficient and effective approach to researching, interpreting, and analyzing financial statements.
Financial analysis is all about involves using financial data to assess a company’s performance and make recommendations about how it can improve going forward.