{"id":2437,"date":"2019-09-12T13:33:00","date_gmt":"2019-09-12T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=2437"},"modified":"2026-03-02T18:33:05","modified_gmt":"2026-03-02T18:33:05","slug":"steps-financial-statement-analysis-framework","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/","title":{"rendered":"The Financial Statement Analysis Framework"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Introduction to Financial Statement Analysis (2025 Level I CFA\u00ae Exam \u2013 FRA \u2013 Module 1)\",\n  \"description\": \"Level I CFA\u00ae Program video lesson offered by AnalystPrep. This module introduces the purpose and scope of financial reporting and financial statement analysis, covering the roles of the statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows. It also explains the importance of financial statement notes, supplementary disclosures, audit objectives and reports, internal controls, additional information sources used by analysts, and the steps in the financial statement analysis framework.\",\n  \"uploadDate\": \"2022-03-31T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/TEUq4EDZCmA\/default.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=TEUq4EDZCmA\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/TEUq4EDZCmA\",\n  \"duration\": \"PT29M01S\"\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Sensitivity analysis in the financial statement analysis framework\",\n    \"text\": \"In which step of the financial statement analysis framework would performing sensitivity analysis most likely be involved?\\n\\nA. Follow-up.\\nB. Processing data.\\nC. Collecting input data.\",\n    \"answerCount\": 3,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is B. Processing data. Sensitivity analysis is performed after financial data has been collected and involves analyzing how changes in assumptions affect results, which is part of the data processing step.\"\n    }\n  }\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/TEUq4EDZCmA?si=zFC3OOmrSHGdarPr\" 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>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 recommendations such as whether or not to invest in a company or extend a loan to it.<\/p>\n\n\n\n<div style=\"background:#f3f4f6; padding:16px 14px; border-radius:12px; margin:20px 0; text-align:center;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"\n     style=\"display:inline-flex; align-items:center; justify-content:center; padding:12px 18px; border:2px solid #1d4ed8; border-radius:999px; color:#1d4ed8; text-decoration:none; font-weight:600; font-size:16px; line-height:1; background:#ffffff; white-space:nowrap;\">\n    Apply the financial statement analysis framework with a free CFA trial\n  <\/a>\n<\/div>\n\n\n<h2><strong>Steps Involved in the Financial Statement Analysis Framework<\/strong><\/h2>\n<p>Financial statement analysis framework involves six steps. These include:<\/p>\n<ol>\n<li><strong>articulating the purpose and context of the analysis<\/strong><em>:<\/em> this step guides further decisions about the approach, tools, data sources, and the format which the final report will assume. It also defines the target audience, end product, and timeframe. Further, it identifies the requisite resources and resource constraints. After this, the analyst should be able to compile the specific questions which are to be answered by the analysis;<\/li>\n<li><strong>collecting input data<\/strong>: in this step, the analyst gathers the necessary data to answer the specific questions that were compiled in step 1. This may include obtaining information on the economy and industry within which the company operates. Such data will allow a better understanding of the company\u2019s business, financial position, and financial performance;<\/li>\n<li><strong>processing data<\/strong>: in this step, the analyst processes the data that was collected in step 2 using various tools of analysis. This may involve computing financial ratios and growth rates, creating charts, preparing common-size financial statements, or performing statistical analyses such as regression analysis;<\/li>\n<li><strong>analyzing and interpreting the processed data<\/strong>: the analyst assesses the data that was processed in step 3. The analyst should be able to interpret the output of the analysis as well as use it to support a conclusion or recommendation;<\/li>\n<li><strong>developing and communicating conclusions and recommendations<\/strong>: the analyst should communicate the conclusion and recommendations derived from the analysis in an appropriate format that answers the questions that were posed in step 1; and<\/li>\n<li><strong>doing follow-up<\/strong>: The analyst should perform periodic reviews to determine if the initial conclusions and recommendations still hold. This may require a repeat of all the previous steps periodically.<\/li>\n<\/ol>\n<blockquote>\n<h3><strong>Question<\/strong><\/h3>\n<p>In which step of the financial statement analysis framework would performing sensitivity analysis <em>most likely<\/em> be involved?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">Follow-up.<\/li>\n<li data-tadv-p=\"keep\">Processing data.<\/li>\n<li data-tadv-p=\"keep\">Collecting input data.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>B<\/strong>.<\/p>\n<p>Performing sensitivity analysis would be considered a way of processing the data that has been collected.<\/p>\n<\/blockquote>\n\n\n<div style=\"background:#f3f4f6; padding:22px 18px; border-radius:14px; margin:30px 0; text-align:center;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"\n     style=\"display:inline-flex; align-items:center; justify-content:center; padding:14px 24px; border-radius:999px; background:#1d4ed8; color:#ffffff; text-decoration:none; font-weight:700; font-size:17px; line-height:1;\">\n    Start Free Trial \u2192\n  <\/a>\n  <p style=\"\n       margin:20px auto 0;\n       max-width:720px;\n       font-size:16px;\n       line-height:1.6;\n       color:#333333;\n     \">\n     Master the CFA Level I financial statement analysis process with exam-style questions, step-by-step explanations, and performance tracking.\n  <\/p>\n\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>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&#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-2437","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 Statement Analysis Framework | CFA Level 1<\/title>\n<meta name=\"description\" content=\"The financial statement analysis framework guides analysts in assessing financial statements, focusing on performance, risks, and decision-making insights.\" \/>\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\/steps-financial-statement-analysis-framework\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial Statement Analysis Framework | CFA Level 1\" \/>\n<meta property=\"og:description\" content=\"The financial statement analysis framework guides analysts in assessing financial statements, focusing on performance, risks, and decision-making insights.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/\" \/>\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=\"2026-03-02T18:33:05+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=\"2 minutes\" \/>\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\/steps-financial-statement-analysis-framework\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/\"},\"author\":{\"name\":\"Simon\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687\"},\"headline\":\"The Financial Statement Analysis Framework\",\"datePublished\":\"2019-09-12T13:33:00+00:00\",\"dateModified\":\"2026-03-02T18:33:05+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/\"},\"wordCount\":420,\"articleSection\":[\"Financial Reporting and Analysis\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/\",\"name\":\"Financial Statement Analysis Framework | CFA Level 1\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\"},\"datePublished\":\"2019-09-12T13:33:00+00:00\",\"dateModified\":\"2026-03-02T18:33:05+00:00\",\"author\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687\"},\"description\":\"The financial statement analysis framework guides analysts in assessing financial statements, focusing on performance, risks, and decision-making insights.\",\"breadcrumb\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"The Financial Statement Analysis Framework\"}]},{\"@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 Statement Analysis Framework | CFA Level 1","description":"The financial statement analysis framework guides analysts in assessing financial statements, focusing on performance, risks, and decision-making insights.","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\/steps-financial-statement-analysis-framework\/","og_locale":"en_US","og_type":"article","og_title":"Financial Statement Analysis Framework | CFA Level 1","og_description":"The financial statement analysis framework guides analysts in assessing financial statements, focusing on performance, risks, and decision-making insights.","og_url":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/","og_site_name":"AnalystPrep | CFA\u00ae Exam Study Notes","article_published_time":"2019-09-12T13:33:00+00:00","article_modified_time":"2026-03-02T18:33:05+00:00","author":"Simon","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Simon","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/"},"author":{"name":"Simon","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687"},"headline":"The Financial Statement Analysis Framework","datePublished":"2019-09-12T13:33:00+00:00","dateModified":"2026-03-02T18:33:05+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/"},"wordCount":420,"articleSection":["Financial Reporting and Analysis"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/","name":"Financial Statement Analysis Framework | CFA Level 1","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website"},"datePublished":"2019-09-12T13:33:00+00:00","dateModified":"2026-03-02T18:33:05+00:00","author":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/8d6352b658ba58a707920fba950b3687"},"description":"The financial statement analysis framework guides analysts in assessing financial statements, focusing on performance, risks, and decision-making insights.","breadcrumb":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/steps-financial-statement-analysis-framework\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/cfa-level-1-exam\/"},{"@type":"ListItem","position":2,"name":"The Financial Statement Analysis Framework"}]},{"@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\/2437","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=2437"}],"version-history":[{"count":34,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/2437\/revisions"}],"predecessor-version":[{"id":59337,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/2437\/revisions\/59337"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/media?parent=2437"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/categories?post=2437"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/tags?post=2437"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}