How can reported data be used: analysis, ratios, and limitations.

This unit considers how and why users of financial statements might seek to analyse them to gain insights into the performance and financial structure of different businesses. Many interested parties rely on published financial information to make decisions, for example, on whether to invest, to lend or to trade. They may even use ratios to predict company failure. The process of analysis starts with understanding the company operationally and reviewing the financial information available. Ratio analysis builds on this by showing the relationship between linked figures within the financial statements and by providing a basis for relevant comparisons. This unit will explain the process of analysis with a particular focus on applying it to published financial statements.