Congratulations! You've mastered creating financial statements. But here's the exciting question: what do all those numbers actually tell you about the business?
Welcome to financial statement analysis - where numbers become insights!
Engagement Message
Name one specific business question you could answer by analyzing financial statements.
Think about it: you now know how to prepare an income statement showing $50,000 revenue and $30,000 expenses. But is $20,000 profit good or bad?
Without context, numbers are just... numbers. Analysis gives them meaning!
Engagement Message
What information would help you decide if $20,000 profit is impressive or disappointing?
Financial statement analysis helps answer critical business questions: Is the company profitable? Can it pay its bills? Is it growing or shrinking?
These insights guide decisions for owners, investors, lenders, and managers.
Engagement Message
Which stakeholder group is most concerned about a company’s ability to pay its bills on time?
The secret is comparison. A single number means little, but comparing numbers reveals patterns and trends.
You might compare this year to last year, or your company to competitors, or actual results to budgets.
Engagement Message
Sales rose from $100,000 to $120,000. What percentage growth is that, and what might it indicate?
Let's see comparison in action. Say Company A has $10,000 profit and Company B has $50,000 profit. Which performed better?
You can't tell yet! What if Company A's revenue was $20,000 and Company B's was $1,000,000?
Engagement Message
Now which company do you think performed better, and why?
