Analyzing Financial Statements
Objective 15-5 Describe how computing financial ratios can help users get more information from financial statements to determine the financial strengths of a business.
Financial statements present a lot of information, but how can it be used? How, for example, can statements help investors decide what stock to buy or help lenders decide whether to extend credit? Answers to such questions for various stakeholders—employees, managers, unions, suppliers, the government, customers—can be answered this way: Statements provide data, which can, in turn, reveal trends and be applied to create various ratios (comparative numbers). We can then use these trends and ratios to evaluate a firm’s financial health, its progress, ...
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