What Kind of Financial Information is Required?

There are various types of financial statements that one would require for financial analysis. In any analysis, you will find that you will need at least one of the following data for analysis.

Financial Statements

The income statement or the profit and loss statement provide useful information on the revenues and gains of a firm from non-primary sources. The income statement will usually show the net income which is arrived at after deducting expenses from the total revenue.

The balance sheet is a document that shows the assets, liabilities and capital of the business at net book value. Firms usually indicate the income and expenditure of a company over a given period, usually one year.

When there are changes in the balance sheet, income, cash, and cash equivalents, one would need the cash flow statements of a firm to see these changes. Such analysis is further broken down into operating, investing as well as financial activities. In simple terms, it is what comes into the business and leaves the company .it   tracks revenue, borrowed cash, earned income or investments.

Annual reports released to the shareholders show detailed information on the financial performance of a company. Sometimes the data may require further clarification, hence the use of notes to financial statements. The management decision and analysis or MD&A provides an overview of a company’s performance for the previous year.

Which methods of accounting do a firm use?

The only way you can know is to look at the depreciation, deferred tax and leasing, if it is the depreciation for instance, you would need further to see if it is a straight line or reducing balance.

For accountability, a company should have its books audited in conformity with international standards. The Audit reports are essential as they provide material disclosures on the strengths and weaknesses in the financial books of accounts.

To plan for the future, a company needs to make future projections for the profits and revenues, among other variables spread over the years.

Lastly, a firm would need to compare industry standards to know how your firm’s operating results with the competitors. For your firm to be competitive and identify its strengths or weaknesses, you would need a competitor’s data.

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