Financial Statement Analysis: Advantages and Disadvantages
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Discuss the advantage and disadvantages of financial statement analysis. How can it help a manager make decisions and how might it mislead you? (Response should be a minimum of 400 words) • Use APA format for any quotations or citations you use to support your answer
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This solution explains the pros & cons of financial statement analysis. The sources used are also included in the solution.
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Advantages of financial statement analysis are that it helps use financial statements for future planning and decision making. The financial statements show the budget of the company. Another advantage is that a financial statement reveals how much the company earns per year in sales. These may fluctuate but the analyst is able to identify a pattern. Another advantage is that the internal strengths and weaknesses of the business are revealed by comparing the balance sheet with the income statement. The financial statements summarize the accounting process and give an insight into the business. An important advantage of the financial statement analysis is that it gives enables the investor to make a knowledgeable decision about investing (Lasher. W, 2013). Financial analysis also reveals if the company ...
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