Financial statement analysis involves the analysis of a company’s past, present as well as its future prospects. Companies report their performance to interested parties such as investors, creditors and analysts through financial statements. The interested parties use the information provided in the financial statements along with other relevant information to analyze and make decisions about the concerned company such as whether to invest in the stock of the company or to sell out, whether to suggest investing in the stock to others, etc.

1. A A R W I N ' S G U I D E T O C F A
P R E S E N T S
F I N A N C I A L
S T A T E M E N T
A N A L Y S I ST E R 1 6
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2. Financial statement analysis
involves the analysis of a company's
past, present and future prospects.
Companies present their financial
performance to interested parties
through their financial statements.
Interested parties such as investors,
creditors and analysts use this
information to make decisions
about the company and its stock.

3. T Y P E S O F
F I N A N C I A L
S T A T E M E N T S
Balance sheet
Income statement
Statement of cash flows
Statement of changes to
owner's equity
Footnotes
Management discussion and
analysis
Auditor's report

4. BALANCE
SHEET
represents a company's
financial position on a given
date. Comprises of assets,
liabilities and owner's equity

5. INCOME STATEMENT
RECORDS REVENUES,
EXPENSES, GAINS AND
LOSSES
Income Statement

6. Comprises of;
cash flows from operating
activities
cash flows from investing
activities
cash flows from financing
activities
records changes in the
owner's investment in the
business over the accounting
period
increase in stake ­ by whom
and by how much
dilution in stake ­ by whom,
to whom and by how much
Statement of cash
flows
Statement of
changes to owner's
equity

7. FOOT
NOTES
provide details such as
accounting method used,
assumptions and estimates

8. M A N A G E M E N T ' S
most important and useful part of the
financial reports. discusses future
outlook, material events and
uncertainties.
DISCUSSION &
ANALYSIS

9. I N D E P E N D E N T R E V I E W B Y A N
A C C O U N T I N G F I R M T O G A U G E
correctness, fairness and reliability
AUDITOR'S
REPORT

10. T H A N K Y O U
R E A D T H E C O M P L E T E A R T I C L E O N
A A R W I N ' S G U I D E T O C F A
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