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Questions and Answers
What is the main purpose of financial analysis?
What are the key takeaways of conducting financial analysis internally?
What are the two main types of financial analysis?
What does a cash flow statement primarily show?
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What does a balance sheet mainly include?
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Study Notes
Financial Analysis
- The main purpose of financial analysis is to evaluate a company's financial performance, identify areas of improvement, and make informed business decisions.
Internal Financial Analysis
- Conducting financial analysis internally helps to identify areas of inefficiency, optimize resource allocation, and develop strategies for growth and profitability.
- Internal financial analysis enables companies to track their financial performance, make adjustments to operations, and improve overall financial health.
Types of Financial Analysis
- There are two main types of financial analysis: horizontal analysis and vertical analysis.
- Horizontal analysis involves comparing line items on financial statements over time to identify trends and patterns.
- Vertical analysis involves analyzing each line item on a financial statement as a percentage of a base item, such as sales or total assets.
Financial Statements
- A cash flow statement primarily shows the inflows and outflows of cash and cash equivalents over a specific period of time.
- A balance sheet mainly includes information about a company's assets, liabilities, and equity at a specific point in time, providing a snapshot of its financial position.
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Description
Test your knowledge of financial analysis and accounting basics with this quiz. Assess your understanding of cash flow statements, income (P&L) statements, balance sheets, and key financial concepts such as accrual accounting, depreciation, and breakeven time.
