This competency focuses on how to analyze and evaluate the financial performance of a business using financial information provided by a company's annual report and related financial statements. You will not only analyze the financial health of an organization, but also make industry comparisons, using techniques such as vertical/common-size analysis, horizontal/trend analysis, and ratio analysis. This is the last in a series of eight accounting competencies and synthesizes the knowledge and skills you have learned from the seven preceding competencies: Fundamentals of Accounting, Accounting Cycle & Transaction Analysis, Financial Reporting, Accounting for Long-Term Investing and Financing Decisions, Accounting for Working Capital, Accounting for Managerial Decisions, and Financial Planning.

COMPETENCY OBJECTIVES

Upon successful mastery of this competency, you will be able to:

• Understand the purpose and the five step process of financial analysis: (1) understand a business’s model and strategy; (2) understand the business environment; (3) analyze the content of the Annual Report; (4) analyze business operations; and (5) use financial analysis to make decisions.
• Apply the techniques of financial analysis (i.e., vertical analysis; horizontal and trend analysis; ratio analysis and industry comparisons) to evaluate the performance of a business.