Questions and Answers
What is the main purpose of financial analysis?
To determine the performance and suitability of businesses, projects, and finance-related transactions
What are the two main types of financial analysis mentioned in the text?
Fundamental analysis and technical analysis
How can financial analysis conducted internally be beneficial?
Help fund managers make future business decisions or review historical trends for past successes
What does a cash flow statement primarily indicate?
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What does a balance sheet primarily provide information about?
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Study Notes
Financial Analysis
- The main purpose of financial analysis is to evaluate the financial performance and position of an organization to make informed business decisions.
Types of Financial Analysis
- There are two main types of financial analysis: horizontal analysis (comparing line items over time) and vertical analysis (comparing line items to a total).
Internal Financial Analysis
- Conducting financial analysis internally can be beneficial as it helps management identify areas of improvement, optimize resource allocation, and develop strategies for growth.
Cash Flow Statement
- A cash flow statement primarily indicates the inflows and outflows of cash and cash equivalents over a specific period, helping to assess a company's liquidity and solvency.
Balance Sheet
- A balance sheet primarily provides information about a company's financial position, including its assets, liabilities, and equity, at a specific point in time.
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