Title: A Short Primer in the Accounting of Financial Statements
Abstract: This chapter explains the basics of the financial statements and the Generally Accepted Accounting Principles (GAAP) that underlie their construction. Financial statements are the primary source of information for most investors and analysts. The accounting equation is used to prepare the balance sheet, the income statement, and the statement of cash flows and the interrelationships among these statements are explained. Financial analysis is part of a greater framework of business analysis that allows analysts to assess the performance of a company and identify in advance potential indicators of deterioration or even failure. Two common types of ratio analyses exist: trend analysis (common-size analysis) and cross-sectional analysis. Trend analysis compares the company's ratios over a specified historical time period and identifies trends that might indicate financial performance improvement or deterioration. Common-size statements normalize balance sheet and income statements and allow the analyst to make easier comparisons of different sized firms.
Publication Year: 2015
Publication Date: 2015-01-30
Language: en
Type: other
Indexed In: ['crossref']
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