Financial Statement Analysis Book

[Elijah Rakestraw]

Creditorsrely on financial statements to evaluate whether a company or organization will be able to pay back a debt. Regulatory authorities, like the US Securities and Exchange Commission (SEC), rely on financial statements to determine whether a company meets the accounting standards required of a publicly traded company. Investors rely on financial statements in order to understand whether investing in a company would be profitable. And management relies on financial statements to make intelligent business decisions and communicate with investors and key stakeholders.

Companies will often produce a number of financial statements, each of which is tailored to the needs of a particular audience. The information contained in each of these documents will vary by necessity.

Liabilities refer to money the company owes to a debtor. This may include outstanding payroll expenses, debt payments, rent and utility payments, money owed to suppliers, taxes, bonds payable, and more.

While it is not a financial document in and of itself, an MD&A will typically provide additional context about why the company performed the way that it did during the reporting period, which can be incredibly helpful to investors, analysts, and creditors.

While an MD&A should always be taken with a grain of salt, the Sarbanes-Oxley Act of 2002 mandates that senior corporate officers personally certify in writing that the company's financial statements comply with SEC disclosure requirements and fairly present, in all material aspects, the operations and financial condition of the issuer.

Vertical and horizontal analysis are two related, but different, techniques used to analyze financial statements. They each refer to the way in which a financial statement is read, and the comparisons that an analyst can draw from that reading. Both types of analysis are critical to gaining an accurate understanding of the information provided in a financial statement.

Do you want to take your career to the next level? Explore our online finance and accounting courses, which can teach you the key financial concepts you need to understand business performance and potential. To get a jumpstart on building your financial literacy, download our free Financial Terms Cheat Sheet.

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My goal is to figure out how to create a traditional, Excel-looking Airtable for financial statements that I can then do creative analysis against. Having that format would make it a lot easier to import or copy-paste. Right now I do the work a line at a time.

I can see the value in having lots of tables with links and cross links and using variables / tags to pull data for further analysis. I expect adding the pivot table block would make this far more powerful.

My next upgrade to this table and my analysis overall is to create tables that gather more unstructured intelligence, such as management bios, tenure, photos, glassdoor ratings, customer reviews and case studies, etc.

A single base that combines baseline financial data (not that important) with qualitative data (much more important) to look for higher level business drivers (most important) is beyond the scope of Excel.

In Excel, I can put different formulas for each vertical time period (Year) column based on the Incentive (left most column), which is different for each row. I can then drag the formula horizontally. In the Airtable, each column has to have the same formula.

Hi @Tim_Beyers ! How is Airtable working out for you now with the type of creative analysis that you are doing. I am having a very similar use case in front of me and want to shift from excel as well.

One of the main tasks of an analyst is to perform an extensive analysis of financial statements. In this free guide, we will break down the most important types and techniques of financial statement analysis.

Below is an example of the cash flow statement and its three main components. Linking the 3 statements together in Excel is the building block of financial modeling. To learn more, please see our online courses to learn the process step by step.

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We investigate whether an LLM can successfully perform financial statement analysis in a way similar to a professional human analyst. We provide standardized and anonymous financial statements to GPT4 and instruct the model to analyze them to determine the direction of future earnings. Even without any narrative or industry-specific information, the LLM outperforms financial analysts in its ability to predict earnings changes. The LLM exhibits a relative advantage over human analysts in situations when the analysts tend to struggle. Furthermore, we find that the prediction accuracy of the LLM is on par with the performance of a narrowly trained state-of-the-art ML model. LLM prediction does not stem from its training memory. Instead, we find that the LLM generates useful narrative insights about a company's future performance. Lastly, our trading strategies based on GPT's predictions yield a higher Sharpe ratio and alphas than strategies based on other models. Taken together, our results suggest that LLMs may take a central role in decision-making.

In the final course of this certificate, you will apply your skills towards financial statement analysis. If you have the foundational concepts of accounting under your belt, you are ready to put them into action in this course. Here, you will learn how to reconcile different types of accounts, check for accuracy, and troubleshoot errors. Additionally, you will practice how to apply different analytical methods to key financial statements and understand how these methods inform a variety of business decisions.

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When you enroll in the course, you get access to all of the courses in the Certificate, and you earn a certificate when you complete the work. Your electronic Certificate will be added to your Accomplishments page - from there, you can print your Certificate or add it to your LinkedIn profile. If you only want to read and view the course content, you can audit the course for free.

Two (2) to three (3) students are challenged with analyzing financial statements of two (2) companies from the same industry, preparing a written analysis, and then presenting their findings and recommendations.

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