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Financial Statement Analysis, specifically Ratio Analysis is often performed by managers, investors, and creditors. What is...

Financial Statement Analysis, specifically Ratio Analysis is often performed by managers, investors, and creditors. What is the primary goal of each of these groups when evaluating ratios?

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Answer #1

Financial statement analysis(FSA) gives you a snapshot of the overall profile of a company.

Managers perform FSA for getting insights on how much progress they have made in terms of achieving the target for the company. They perform the analysis to check that everything is in place as far as the financial condition of the company is the subject.

Investors perform FSA to invest in a company if the company is doing good and if they think that the company will be more valuable in the future they will invest. Investors will basically see how much free cash flows the company is generating, management quality, liquidity ratio and growth ratios like sales growth, profit growth YoY and QoQ.

Creditors will do FSA to give credit to the company mostly they will see the liquidity coverage ratio, debt service ratio, asset turnover ratio, etc.

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