finance analysis

1. In examining balance sheet accounts, try to determine whether this balance sheet is a complete representation of the firm’s economic position. Do you see any anomalies?

2. When evaluating the income statement, the main point is to properly assess the quality of earnings as a complete representation of the firm’s economic performance. What kinds of performance indicators are you seeing in the income statement?

3. Evaluation of the statement of cash flows helps in understanding the impact of the firm’s liquidity position from its operations, investments and financial activities over the period—in essence, where funds came from, where they went, and how the overall liquidity of the firm was affected. Does the company you chose have adequate liquidity? How do you know?

4. Analyze current profitability and risk. The most common analysis tools are key financial statement ratios relating to liquidity, asset management, profitability, debt management/coverage and risk/market valuation.

5. With respect to profitability, determine how profitable the operations of the company are relative to its assets—independent of how the company finances those assets—and how profitable is the company from the perspective of the equity shareholders.