Match statements and periods
A balance sheet shows a position at a date. Income and cash-flow statements cover a period. Check units, reporting dates and notes before comparing companies or years.
Calculate, compare, explain
Write each ratio formula and show the inputs. Compare consistent periods and relevant peers. Connect changes to statement details rather than calling every increase good. Profit and cash flow measure different things.
Example
Invented current-ratio example, not an archive submission or investment recommendation.
- Inputs
- A fictional company reports current assets of $60,000 and current liabilities of $30,000 at year-end.
- Calculation
- Current ratio = current assets / current liabilities = $60,000 / $30,000 = 2.0.
- Comparison
- Last year the figures were $45,000 and $30,000, giving 1.5. The ratio rose because current assets increased while current liabilities stayed unchanged.
- Interpretation
- The company has $2 of current assets per $1 of current liabilities. Check receivables, inventory and payment timing before concluding it can meet its obligations.
Review your draft
Cite the statement, date and units for every input. Explain limitations and distinguish your calculations from management commentary.
Further reading: SEC: reading financial statements.
Past financial analysis requests
Real historical request types, described without student text or files.
- Financial analysis coursework request — September 2021
- Financial analysis coursework request — September 2021
- Financial analysis coursework request — August 2021
- Financial analysis coursework request — July 2021
Common questions
Is a higher current ratio always better?
No. Composition and timing matter. Slow-moving inventory or overdue receivables may inflate current assets without supplying cash when needed.
Can profit replace cash-flow analysis?
No. Revenue and expense recognition can differ from cash receipts and payments. Read the cash-flow statement alongside the income statement.