Category: Financial Analysis

FS#8 HORIZONTAL ANALYSIS

Horizontal analysis, also known as trend analysis, is used to spot financial trends over a specific number of accounting periods. Horizontal analysis can be used with an income statement or a balance sheet. At least two accounting periods are required for a valid comparison, though in order to spot actual trends, it’s better to include three or more accounting periods when calculating horizontal analysis.

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FS #6 CASH FLOW ANALYSIS

A cash flow statement is one of the most important financial statements for a project or business. The statement can be as simple as a one page analysis or may involve several schedules that feed information into a central statement. A cash flow statement is a listing of the flows of cash into and out of the business or project. Think of it as your checking account at the bank. Deposits are the cash inflow and withdrawals (checks) are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time.

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FS #5 WHY FINANCIAL ANALYSIS MATTERS

Financial analysis is an important tool that gives an overview of an organization’s financial wellbeing and helps inform strategic decisions. It helps financial advisors review company performance, sustainability, and growth by using foundational tools like income statements, balance sheets, and cash flow statements to do various calculations. In today’s data-driven world, financial advisors are expected to make compelling, fact-based suggestions supported by analytics.

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FS #1 OVERVIEW THE BALANCE SHEET

If you went through all your transactions and worked out the net value of each account, you’d be able to see things like

  • How much cash you have in the bank
  • The total value of the cotton in your inventory
  • How much money you owe to your cotton suppliers

This will give you a snapshot of the current state of your company, split up into “everything you own” (Assets) and “everything you owe” (Liabilities) — a Balance Sheet. These generally won’t be equal — ideally your assets will be worth more than your liabilities.

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