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Why should somebody begin a case analysis with a financial analysis?

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sbridges | Student, Undergraduate | (Level 1) Salutatorian

Posted June 2, 2013 at 9:28 PM via web

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Why should somebody begin a case analysis with a financial analysis?

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kipling2448 | (Level 2) Educator Emeritus

Posted June 2, 2013 at 10:26 PM (Answer #1)

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When examing a particular corporation or sector of industry, the bottom line is, of course, profitability.  Particularly when analyzing a publicly-traded company, the financial value of that company is closely followed by interested observers, mainly the stock holders themselves, but also by competitors and potential procurers of the company.  A thorough financial analysis of the company in question, therefore, is the most important component of any larger examination.  Examining the balance sheets, comparing expenses with revenue, is key to assessing how well the company is managed.

Of particular importance when analyzing a company, and its financial status, is ensuring the integrity of the data provided by the company. It is not unheard of for corporate officials to manipulate financial data for the purpose of presenting a healthier bottom line than actually exists.  For that reason, an independent audit of the corporate financial ledgers is essential.  Much can be determined about how well a company is operated by its financial data, but that data has to be accurate.

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