From the course: Financial Accounting Foundations
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How you can use financial statements
From the course: Financial Accounting Foundations
How you can use financial statements
- You now know about financial statements, the accounting process, important financial accounting topics such as revenue recognition and leases, and financial ratio analysis. - But here are some cautions. First, financial statement analysis can't do anything if the underlying financial statement data are not reliable. If you're doing an important analysis, make sure that the data come from a reliable source. If the data come from a person you can trust, good. - If you're not sure about the source, it's a good idea to have the numbers checked by an outside party, an auditor. - For example, a friend of mine asked me to help him analyze the financial accounting numbers for a business he was thinking of buying. It didn't take me long to realize that the financial numbers for this family business were hopelessly mixed in with personal family expenses, such as groceries, gas, utilities, and so forth. It was impossible to figure…
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