{"id":2427,"date":"2019-09-12T13:33:00","date_gmt":"2019-09-12T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=2427"},"modified":"2026-02-04T14:38:37","modified_gmt":"2026-02-04T14:38:37","slug":"roles-financial-reporting-financial-statement-analysis","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/","title":{"rendered":"Financial Reporting and Financial Statement Analysis"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Role of financial statement analysis\",\n    \"text\": \"Which of the following best describes the role of financial statement analysis?\\n\\nA. To determine whether a company should close its operations.\\n\\nB. To provide information on a company\u2019s financial performance and position.\\n\\nC. To use a company\u2019s financial reports to evaluate its past, future, and potential performance.\",\n    \"answerCount\": 3,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"C. To use a company\u2019s financial reports to evaluate its past, future, and potential performance.\\n\\nFinancial statement analysis involves examining a company\u2019s financial reports to assess historical performance, forecast future performance, and evaluate overall financial health and potential.\"\n    },\n    \"suggestedAnswer\": [\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"A. To determine whether a company should close its operations.\"\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"B. To provide information on a company\u2019s financial performance and position.\"\n      }\n    ]\n  }\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/TEUq4EDZCmA?si=TWpQuN33H2wM5ClY\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n\n<p>Financial reporting and financial statement analysis are two very important terminologies in finance. The two terms describe how a company\u2019s financial performance is made known to persons outside the company and how this performance is assessed and used to make economic decisions.<\/p>\n\n\n\n\n<div style=\"margin: 0 0 20px 0;\">\n  <a\n    href=\"https:\/\/analystprep.com\/free-trial\/\"\n    target=\"_blank\"\n    rel=\"noopener noreferrer\"\n    style=\"\n      display: block;\n      width: 100%;\n      border: 2px solid #1e63ff;\n      color: #1e63ff;\n      background: #ffffff;\n      padding: 10px 14px;\n      border-radius: 10px;\n      font-weight: 500;\n      line-height: 1.35;\n      text-decoration: none;\n      box-sizing: border-box;\n      text-align: center;\n    \"\n  >\n    Understand financial reporting roles with a free trial.\n  <\/a>\n<\/div>\n\n\n\n<h2><strong>The Role of Financial Reporting<\/strong><\/h2>\n<p>Financial reporting provides information on a company\u2019s performance, its financial position, as well as changes in its financial position. It usually takes the form of interim financial statements, audited financial statements, management discussion and analysis, and additional disclosures as required by the company\u2019s regulators.<\/p>\n<h2><strong>The Role of Financial Statement Analysis<\/strong><\/h2>\n<p>In financial statement analysis, a company\u2019s financial reports and other related pieces of information, such as financial notes and supplementary schedules, are assessed and used to evaluate the company\u2019s performance and financial position in order to make an investment or other economic decision.<\/p>\n<p>Financial statement analysis can be used to determine if a company is profitable, adequately capitalized, able to meet its long and short-term obligations, and able to generate positive cash flows on a continuous basis. It also allows analysts to project estimates or expectations of a company\u2019s future performance and financial position.<\/p>\n<blockquote>\n<h3><strong>Question<\/strong><\/h3>\n<p>Which of the following <em>best<\/em> describes the role of financial statement analysis?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">To determine whether a company should close its operations.<\/li>\n<li data-tadv-p=\"keep\">To provide information on a company\u2019s financial performance and position.<\/li>\n<li data-tadv-p=\"keep\">To use a company\u2019s financial reports to evaluate its past, future, and potential performance.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <b>C<\/b>.<\/p>\n<p>In financial statement analysis, a company\u2019s financial reports are used to evaluate its past, future, and potential performance.<\/p>\n<p><strong>A is incorrect<\/strong> because financial statement analysis does not only provide information on wether a business should close its operations, but also how profitable it is, its financial ratios, etc.<\/p>\n<p><strong>B is incorrect<\/strong> because it describes the role of financial reporting and not financial statement analysis.<\/p>\n<\/blockquote>\n\n\n<div style=\"margin: 40px 0; text-align: center;\">\n  <a\n    href=\"https:\/\/analystprep.com\/free-trial\/\"\n    target=\"_blank\"\n    rel=\"noopener noreferrer\"\n    style=\"\n      display: inline-block;\n      background: #1f5fcc;\n      color: #ffffff;\n      padding: 16px 34px;\n      border-radius: 12px;\n      font-weight: 700;\n      font-size: 20px;\n      text-decoration: none;\n      box-shadow: 0 4px 12px rgba(0,0,0,0.15);\n    \"\n  >\n    Start Free Trial \u2192\n  <\/a>\n\n  <div style=\"margin-top: 12px; font-size: 16px; color: #333333;\">\n    Practice CFA reporting questions and strengthen analysis skills.\n  <\/div>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Financial reporting and financial statement analysis are two very important terminologies in finance. The two terms describe how a company\u2019s financial performance is made known to persons outside the company and how this performance is assessed and used to make&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-2427","post","type-post","status-publish","format-standard","hentry","category-financial-reporting-and-analysis","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Financial Reporting &amp; Statement Analysis | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Understand the role of financial reporting in assessing a company\u2019s performance, position, and financial changes over time.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial Reporting &amp; Statement Analysis | CFA Level 1\" \/>\n<meta property=\"og:description\" content=\"Understand the role of financial reporting in assessing a company\u2019s performance, position, and financial changes over time.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/\" \/>\n<meta property=\"og:site_name\" content=\"AnalystPrep | CFA\u00ae Exam Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2019-09-12T13:33:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-02-04T14:38:37+00:00\" \/>\n<meta name=\"author\" content=\"Simon\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Simon\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/\"},\"author\":{\"name\":\"Simon\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687\"},\"headline\":\"Financial Reporting and Financial Statement Analysis\",\"datePublished\":\"2019-09-12T13:33:00+00:00\",\"dateModified\":\"2026-02-04T14:38:37+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/\"},\"wordCount\":341,\"articleSection\":[\"Financial Reporting and Analysis\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/\",\"name\":\"Financial Reporting & Statement Analysis | CFA Level 1\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\"},\"datePublished\":\"2019-09-12T13:33:00+00:00\",\"dateModified\":\"2026-02-04T14:38:37+00:00\",\"author\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687\"},\"description\":\"Understand the role of financial reporting in assessing a company\u2019s performance, position, and financial changes over time.\",\"breadcrumb\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Financial Reporting and Financial Statement Analysis\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\",\"name\":\"AnalystPrep | CFA\u00ae Exam Study Notes\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687\",\"name\":\"Simon\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/analystprep-150x150.png\",\"contentUrl\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/analystprep-150x150.png\",\"caption\":\"Simon\"},\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/analystprep\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/TEUq4EDZCmA\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"1742\" \/>\n<meta property=\"og:video:width\" content=\"480\" \/>\n<meta property=\"og:video:height\" content=\"270\" \/>\n<meta property=\"ya:ovs:adult\" content=\"false\" \/>\n<meta property=\"ya:ovs:upload_date\" content=\"2019-09-12T13:33:00+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Financial Reporting & Statement Analysis | CFA Level 1","description":"Understand the role of financial reporting in assessing a company\u2019s performance, position, and financial changes over time.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/","og_locale":"en_US","og_type":"article","og_title":"Financial Reporting & Statement Analysis | CFA Level 1","og_description":"Understand the role of financial reporting in assessing a company\u2019s performance, position, and financial changes over time.","og_url":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/","og_site_name":"AnalystPrep | CFA\u00ae Exam Study Notes","article_published_time":"2019-09-12T13:33:00+00:00","article_modified_time":"2026-02-04T14:38:37+00:00","author":"Simon","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Simon","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/"},"author":{"name":"Simon","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687"},"headline":"Financial Reporting and Financial Statement Analysis","datePublished":"2019-09-12T13:33:00+00:00","dateModified":"2026-02-04T14:38:37+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/"},"wordCount":341,"articleSection":["Financial Reporting and Analysis"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/","name":"Financial Reporting & Statement Analysis | CFA Level 1","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website"},"datePublished":"2019-09-12T13:33:00+00:00","dateModified":"2026-02-04T14:38:37+00:00","author":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687"},"description":"Understand the role of financial reporting in assessing a company\u2019s performance, position, and financial changes over time.","breadcrumb":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/roles-financial-reporting-financial-statement-analysis\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/cfa-level-1-exam\/"},{"@type":"ListItem","position":2,"name":"Financial Reporting and Financial Statement Analysis"}]},{"@type":"WebSite","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/","name":"AnalystPrep | CFA\u00ae Exam Study Notes","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/analystprep.com\/cfa-level-1-exam\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687","name":"Simon","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/analystprep-150x150.png","contentUrl":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2016\/09\/analystprep-150x150.png","caption":"Simon"},"url":"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/analystprep\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/TEUq4EDZCmA","og_video_type":"text\/html","og_video_duration":"1742","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2019-09-12T13:33:00+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/2427","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/comments?post=2427"}],"version-history":[{"count":22,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/2427\/revisions"}],"predecessor-version":[{"id":58651,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/2427\/revisions\/58651"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/media?parent=2427"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/categories?post=2427"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/tags?post=2427"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}