Essay on Financial Statement Analysis And Analysis

Essay on Financial Statement Analysis And Analysis

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Financial statements are formal reports which show the current financial position of an entity. There are three main types of financial statements; the balance sheet, the income statement and the cash flow statement (Business Dictionary, 2016). Financial statement analysis refers to the analysis and interpretation of those three main financial statements. It can also be defined as understanding the risk and profitability of an entity (Ready Ratios, 2013). There are different techniques of financial statement analysis including ratio analysis, vertical or common size analysis and horizontal analysis or trend analysis. Another technique sometimes applied is trend analysis of the ratio analysis (Hancock, Robinson and Bazley, 2015).

The major objectives of financial statement analysis are reviewing the company’s performance over past periods, assessing the current financial position, forecasting profitability trends and forecasting financial failure (Fazal, 2011). These objectives in turn satisfy the ultimate objective of providing information about an entity for use in decision making. It is important to note that there can be a lot of subjectivity in financial statements, it is not always simply the facts. Hence, the financial statement analysis can be impacted by the subjectivity.

Part Two

Three of Cardno’s key stakeholders are the Government (Australian Federal and State along with international), Cardno employees and shareholders. The government may use the financial statements as a basis of assessing the tax payable along with assisting in analysis of the economy’s performance for legislation and policy related issues. Cardno is an infrastructure and environmental services company with involvement in transport, water cycles...


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...until the 2014 financial year end. By the end of the 6-month period, it had a decline of approximately 10%.

In comparison with ASX200, Cardno Limited was outperformed. In Graph 5.1, the red line (ASX200) displayed consistent movement, from January 1st of 5367.90 to June 30th of 5395.70. However, share-price peaked during late April at 5536.10 and plummeted to 5070.30 during early February. However, despite all the positive and negative movements, by the end of the 6-month period, ASX200 remained fairly consistent to its initial point. This suggest fluctuations for share-prices of ASX200 indicating the movement for the listed companies during the period. According to the Graph 5.1, results of steady movements imply that the companies are performing in the norm. However, the movement of ASX200 was not necessarily in accordance with the movement of Cardno share price.

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