Financial Analysis Case

Financial Analysis Case

Financial analysis is very important as it is used to interpret the financial performance of a business by looking at the firm’s profitability, solvency, liquidity, and stability. It is also sometimes used for comparison against other similar companies and to determine the company’s suitability for investment. Financial analysts analyze income statements, balance sheets, and cash flow statements (“Analysing Financial Data Notes,” n.d., “Financial Analysis Definition | Investopedia,” n.d.). They also use statistical software packages and spreadsheets, develop forecast, create portfolios and identify trends (“Financial Analysts Job Description - Career Overview and Education for Financial Analysts,” n.d.).

In order for financial analysts to interpret the numbers and rations within the proper context, it is important they understand the local business environment they are analyzing (Yuan Ding, Entwistle, & Stolowy, 2007) as well as to have the necessary tools to be able to deliver the best possible analysis. Some issues that analysts may face include (1) Lack of time for meaningful analysis due to complicated transactional work. (2) The necessary soft skills to adequately persuade managers. (3) Lack of necessary tools to increase productivity. (4) Lack of proper technology to increase efficiency. (4) Lack of talent as these skilled positions are sometimes hard to fill (Bjerke, 2012).

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Analysing Financial