Financial Statement Analysis

Orla Lenihan

Chapter 43 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 1431-1460 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter provides readers with the skills and insights to enable a fuller understanding of a public company’s underlying financial statements. Financial statement analysis is a form of fundamental analysis that identifies and analyzes the key financial information relevant to a company, for the purpose of determining the company’s intrinsic value. This chapter concentrates on the calculation and application of the principal financial ratios for profitability, efficiency, liquidity, solvency, and investment potential. There is an effort to make the content accessible to readers on a practical level, by applying the various ratios to the real financial statements of Johnson & Johnson. While the chapter outlines in detail the quantitative calculations required to undertake financial statement analysis, there is a firm emphasis on the importance of context in properly applying these techniques. The establishment of trends, the comparison of data to benchmarks, and the consideration of strategic factors all form part of this holistic contextual analysis of financial statement information.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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