Financial reporting and financial statement analysis are two very important terminologies in finance. The two terms describe how a company’s financial performance is made known to persons outside the company and how this performance is assessed and used to make…

The statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows represent a complete set of financial statements. These statements can be used in financial statement analysis to evaluate a company’s performance…

Financial statements are accompanied by financial statement notes and supplementary information that help the users of financial statements to understand the information that is reported. Importance of Financial Statement Notes and Supplementary Information Notes to the financial statements provide important…

Annual reports present financial statements that have been audited by an independent accounting firm. Auditing of financial statements is an important function that is performed under specified auditing standards and which may be required by law, regulation, or some form…

To get a fairly accurate picture of a company’s financial position and financial performance, analysts tend to base their financial statement analysis on the company’s audited, annual financial statements. The audit of the annual financial statements, in this case, must…

The financial statement analysis framework is a generic term used to describe the process in which analysts assess financial statements, supplemental information, and other sources of information. Essentially, financial statement analysis framework helps analysts to draw conclusions and make informed…

When reporting on a company’s financial position and performance, it is very important to appropriately classify various business activities of the company. Understanding how this classification is done lays the foundation for understanding financial reporting mechanics. Indeed, this helps in…

Business activities can be reflected in any one of the five broad categories of financial statement elements: assets, liabilities, owners’ equity, revenue, and expenses. Within these financial statement elements are sub-classifications referred to as accounts, which provide individual records of…

Financial statement elements (assets, liabilities, owners’ equity, revenue and expenses) are used as the inputs for the equations which feed into the preparation of a company’s financial statements. The balance sheet and income statement are two of the most popular…

An accounting system allows a company to translate its business activities into usable financial records. The company uses these financial records to assess its profitability, evaluate its financial position, and identify any business activity which requires further action. Recording Business…