Analyzing Financial Statements

Financial statements are documents that provide information about the business entity’s financial status. They report on both assets and liabilities, as well as give other important details like income and expenses to help determine how much profit or loss was made for a given period of time (a quarter, year). Ratios allow the reader to compare different aspects by relating them back into one standard variable. For example: The return-on-assets ratio will show if an organization is making more money than they’re spending by comparing their assets with what they spend in order to find out why exactly this may be happening.