Folder:
115 CFA
File:
115.040.12.01 Financial Analysis - Reading 30 - 1. Evaluating Past Financial Performance

1. Evaluating Past Financial Performance

a. evaluate a company's past financial performance and explain how a company's strategy is reflected in past financial performance;

What is time series analysis?
Compare the company's performance to itself over time to examine the trend of its ratios (e.g., profitability, efficiency, liquidity, and solvency ratios).

What is cross-sectional analysis?
Compare ratios to those of its competitors or the industry.

What are four critical questions an analyst should try to find answers to when examining data?
1. What are the key performance indicators of the company, in light of its competitive strategy?
2. What is driving the company's current performance? Specifically, what factors are causing the changes of a particular ratio over time? Why?
3. What aspects of performance are critical for the company to succeed in the market? How did the company do in the past?
4. What strategy does the company have and what were its impacts on the company's performance in the past?


Source:
  • CFA