Roles of financial reporting and financial statement analysis

Financial reporting (1) is the way to 

  • Show financial performance to investor, creditor, interest parties
  • Provide 
    • Financial information to investors, lenders and other creditors in making decision about providing resources to the entity 
      • Decision includes: buying, selling, holding equity and debt instrument 

Financial statement analysis (2)

  • Use information in financial statement
    • Evaluate past performance 
    • Current financial position
  • To make economic decision
    • Form opinion about company’s ability to 
      • earn profit 
      • generate cash flow
    • Exp: invest or recommend securities to other companies