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We show how to incorporate market data and economic data in the analysis and interpretation of financial ratios. �+�_�b3�2D3����\��fК y���kv��� =1F�&�/�qAp��� ���=��O&00�H��J�qekoVn�u�܂�Fo�w�_pcB����^��f'ƥ�,�晦���3Y����d�N�I�%N�8,q�Z��^��d�D���WД��I �+hķ�f}N�V��D��|� O.R�_�R8�Sq��L�D�SҜr�M�r��q�t�P\ʥ�6E�ENa�b�K�͓C��4I'�{x-��- �rUUr��P�6�#%-��OtX�z����m�N��lZ�n�B��#���EY�:; FI,D�.��t� �dW[�1��d��^�Ʌ,��'Y,��&ۀ��ȫ�}rǑ��� ���W�Ը�xrG����A9n�I@��p�xتV��ai��rBq[ ؑ'Y�E�M��_��mB Financial statements are used as a management tool primarily by company executives and investor’s in assessing the overall position and operating results of the company. M��ӊ External stakeholders use it … Section 4 explains how to compute, analyze, and interpret common financial ratios. The technique is called “Analysis and Interpretation” of financial statements. Consistent accounting procedure. 5 0 obj This Chapter also defines a wide variety of ratios derived from financial statement … The income account shows the earnings for the period covered, while the balance sheet sets forth "the financial position" at the closing date. the operations of the firm is called ‘Financial Statement Analysis’. First, there are the fixed assets , which include the long-term assets of the firm, such as plant, equipment, land and buildings. A financial statement is an organized collection of data according to logical and conceptual framework. stream Entity must include following key elements as part of its complete sets of financial statements. Good decisions ensure business survival, profitability and growth. 0000002974 00000 n K�1�����f:N&{I�7 �j.9���o�0"��AL >-15���(�?�MȢy��W�i��ޟW$��:y�4�B�""��fv���+��� ��[l�\9���9.�)q ����_�Z-�m�Yr�/sПy���@w4�Hm�m��gHYͬ�r>�a؜���68>CV�H����Q؇Q���~wCE�4Q�U����U��{�3�w���̉Cx֍�j�&D�,RXmL�k�����ޑa�C�_ �a��4s{D��f�S��6Xg�x��������R�Ns�9hY�~�y_�~HnP� The balance sheet, which summarizes what a firm owns and owes at a point in time.! Users of financial statements 745 3. Statement A this is a written verbal explanation of the operations of the company during a financial year Balance Sheet B this reflects whether or not the shareholders can rely on the financial statements Cash-Flow Statement C this reflects the profit/loss of the company for the year 4 Directors' Report D this reflects the effect of the operating, To examine how asset value is measured, let us begin with the way assets are categorized in the balance sheet. work for financial statements and the place of financial analysis techniques within the framework. This Chapter explains the calculation and interpretation of common size balance sheets as well as common size income statements. ]���v$��f3�� �� ���HZr��� Analysis consists in breaking down a complex set of facts or figures into simple elements. Many people find it challenging to use a company's financial statements as management tools until they understand how to interpret them. GET THIS BOOK Financial Statement Analysis. <> 0000000691 00000 n This project aims to analyze the financial statement analysis of Starbucks. Analysis and interpretation of financial statements help in determining the liquidity position, long term solvency, financial viability and profitability of a firm. Gripping IFRS Financial Analysis and Interpretation 743 Chapter 25 Chapter 25 Financial Analysis and Interpretation Contents: Page 1. This is the interpretation stage. ipU���&��o��F��-���_j�z��1��% Ɇ endobj Download Analysis AND Interpretation OF Financial Statements. Financial Statement Analysis and Interpretation is a very vital instrument of good management decision-making in business enterprise. Common size financial statements are an important tool in financial statement analysis. Most common types are: Current Ratiomeasures the extent of the number of current assets to current liabilities. Financial Statement.pdf - 1 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS Unit Structure 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.0 Objectives 279 0 obj << /Linearized 1 /O 281 /H [ 788 1034 ] /L 416066 /E 68711 /N 84 /T 410367 >> endobj xref 279 17 0000000016 00000 n In the relative financial statement of the companies. Basic Financial Statements! Generally, the ratio of 1 is considered to be ideal to depict that the company has sufficient current assets in order to repay its current liabilities. 4 0 obj 0000003015 00000 n 3 0 obj The main task of an analyst is to perform an extensive analysis of financial statements Three Financial Statements The three financial statements are the income statement, the balance sheet, and the statement of cash flows. Reliability of Figures. endobj financial ratio analysis we select the relevant information -- primarily the financial statement data -- and evaluate it. Ratios: The term ‘accounting ratio’ is used to describe significant relationships which exist between … Financial Analysis is the process of identifying the financial strength and weaknesses of the firm by properly establishing relationship between items of financial statements. After making analysis of the financial statements, the next step is to use mind for forming an opinion about the enterprise. 0000004368 00000 n 3! j܁ �[6�e���,����Y�� >�q��D!�kT���V��3�V���e^���Gg���.���(hGs݄@I�m��k�����f���R+�$���;�}1yc�I�s��;T1UM�ј�X**�a�_�� �:�c|IGw������oxw�{Ώ1�F���P!�N�d��S7*�'? Without financial statement analysis in investment decisions, an enterprise is likely to make decisions, which could spell its doom. This chapter focuses on the interpretation and analysis of fi nancial statements. ��4�:~����=V"QMgm�n����˻ Horizontal analysis is the method of function statement analysis which represents the percentage income and percentage decrease. �f&�����@�XC#@N�@h��! Statement of comprehensive income 0000001822 00000 n A) When all the figures in a balance sheet are stated as … These three core statements … The statement of cash flows, which reports on cash inflows and outflows to the firm during the period of analysis! Financial Statements: Analysis and Interpretation Meaning of Financial Statements 0000004788 00000 n The process of reviewing and analyzing a company’s financial statements to make better economic decisions is called analysis of financial statements. The term 'financial analysis' also termed as 'analysis and interpretation of financial statements', denotes to the process of determining financial strengths and limitations of the company by establishing strategic affiliation between the items of the balance sheet, P&L A/c and other operative data. 0000050198 00000 n 2 0 obj Aswath Damodaran! 0000003245 00000 n %PDF-1.5 Buy Analysis and Interpretation of Financial Statements Notes PDF Online. Analysis and interpretation of financial statements are an attempt to determine the significance and meaning of the financial statement data so that a forecast may be made of the prospects for future earnings, ability to pay interest, debt maturities, both current as well as long term, and profitability of sound dividend policy. In other words, the process of determining financial strengths and weaknesses of the entity by establishing the strategic relationship between the items of the balance sheet, profit and loss account, and other financial statements. Which of the following statements are false? The term ‘analysis’ means the simplification of financial data by methodical classification of the data given in the financial statements… Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. Section 3 provides a description of analytical tools and techniques. ,^ey�C�H JY$z�P;�Ҧ�D5�^40�dJMU�ϴ��I�OIrN0U�tD(T\�&2�)�“���p���ɫ�rK�#3H�����D��IR!�[\&\Z�H�m�R��� 4R�8�1M6�*K�Ql J�@��4���d� r]@��9����X (�����)� �JJ�Ꙕ���Fv00 H�b```"�jAd`B�ĂFi���?�\`�.b{�c�=�����Mho�n����Ƹ�y %PDF-1.3 %���� A stream The financial statement in which accountants summarize and report asset value is the balance sheet. Guide to Financial Statement Analysis. Ratios deal with figures from Financial Statements therefore cannot be considered in isolation. Analysis and interpretation of financial statements help in determining the liquidity position, Introduction 745 2. ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF 0000001800 00000 n trailer << /Size 296 /Info 277 0 R /Root 280 0 R /Prev 410356 /ID[<7c3bdc80943b17adc182ea6c5a58a65d>] >> startxref 0 %%EOF 280 0 obj << /Type /Catalog /Pages 268 0 R /Metadata 278 0 R /PageLabels 266 0 R >> endobj 294 0 obj << /S 1407 /L 1491 /Filter /FlateDecode /Length 295 0 R >> stream endstream Rather, it involves readers with the material by using real-world examples, with emphasis on the analysis and interpretation of the end result of financial reporting - financial statements. Sections 5 through 8 explain the use of ratios and other analytical data in equity J I��,���b �� ǀ]%(��sA)n �� X <> Gibson does not oversimplify financial statements. 0000000788 00000 n ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT Financial statements are the basis and formal annual reports through which the corporate management communicates Financial information to its owners and various other external parties which include-investors, tax authorities, government, employees etc. Inherent weaknesses in financial statements 745 3.1 Historical figures 3.2 Limited predictive value 3.3 Limited qualitative information A FULL financial statement contains two major parts: an income account and a balance sheet. %���� <>/Font<>/ExtGState<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 720 540] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> 0000002169 00000 n Sometimes, the contents of the financial statements are manipulated by … Share & Embed "Analysis AND Interpretation OF Financial Statements" Please copy … 0000004151 00000 n The income statement, which reports on how much a firm earned in the period of analysis! 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Statement A this is a written verbal explanation of the operations of the company during a financial year Balance Sheet B this reflects whether or not the shareholders can rely on the financial statements Cash-Flow Statement C this reflects the profit/loss of the company for the year 4 Directors' Report D this reflects the effect of the operating, To examine how asset value is measured, let us begin with the way assets are categorized in the balance sheet. work for financial statements and the place of financial analysis techniques within the framework. This Chapter explains the calculation and interpretation of common size balance sheets as well as common size income statements. ]���v$��f3�� �� ���HZr��� Analysis consists in breaking down a complex set of facts or figures into simple elements. Many people find it challenging to use a company's financial statements as management tools until they understand how to interpret them. 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Financial Statement.pdf - 1 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS Unit Structure 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.0 Objectives 279 0 obj << /Linearized 1 /O 281 /H [ 788 1034 ] /L 416066 /E 68711 /N 84 /T 410367 >> endobj xref 279 17 0000000016 00000 n In the relative financial statement of the companies. Basic Financial Statements! Generally, the ratio of 1 is considered to be ideal to depict that the company has sufficient current assets in order to repay its current liabilities. 4 0 obj 0000003015 00000 n 3 0 obj The main task of an analyst is to perform an extensive analysis of financial statements Three Financial Statements The three financial statements are the income statement, the balance sheet, and the statement of cash flows. Reliability of Figures. endobj financial ratio analysis we select the relevant information -- primarily the financial statement data -- and evaluate it. Ratios: The term ‘accounting ratio’ is used to describe significant relationships which exist between … Financial Analysis is the process of identifying the financial strength and weaknesses of the firm by properly establishing relationship between items of financial statements. After making analysis of the financial statements, the next step is to use mind for forming an opinion about the enterprise. 0000004368 00000 n 3! j܁ �[6�e���,����Y�� >�q��D!�kT���V��3�V���e^���Gg���.���(hGs݄@I�m��k�����f���R+�$���;�}1yc�I�s��;T1UM�ј�X**�a�_�� �:�c|IGw������oxw�{Ώ1�F���P!�N�d��S7*�'? Without financial statement analysis in investment decisions, an enterprise is likely to make decisions, which could spell its doom. This chapter focuses on the interpretation and analysis of fi nancial statements. ��4�:~����=V"QMgm�n����˻ Horizontal analysis is the method of function statement analysis which represents the percentage income and percentage decrease. �f&�����@�XC#@N�@h��! 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Analysis and interpretation of financial statements are an attempt to determine the significance and meaning of the financial statement data so that a forecast may be made of the prospects for future earnings, ability to pay interest, debt maturities, both current as well as long term, and profitability of sound dividend policy. In other words, the process of determining financial strengths and weaknesses of the entity by establishing the strategic relationship between the items of the balance sheet, profit and loss account, and other financial statements. Which of the following statements are false? The term ‘analysis’ means the simplification of financial data by methodical classification of the data given in the financial statements… Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. Section 3 provides a description of analytical tools and techniques. ,^ey�C�H JY$z�P;�Ҧ�D5�^40�dJMU�ϴ��I�OIrN0U�tD(T\�&2�)�“���p���ɫ�rK�#3H�����D��IR!�[\&\Z�H�m�R��� 4R�8�1M6�*K�Ql J�@��4���d� r]@��9����X (�����)� �JJ�Ꙕ���Fv00 H�b```"�jAd`B�ĂFi���?�\`�.b{�c�=�����Mho�n����Ƹ�y %PDF-1.3 %���� A stream The financial statement in which accountants summarize and report asset value is the balance sheet. Guide to Financial Statement Analysis. Ratios deal with figures from Financial Statements therefore cannot be considered in isolation. Analysis and interpretation of financial statements help in determining the liquidity position, Introduction 745 2. ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF 0000001800 00000 n trailer << /Size 296 /Info 277 0 R /Root 280 0 R /Prev 410356 /ID[<7c3bdc80943b17adc182ea6c5a58a65d>] >> startxref 0 %%EOF 280 0 obj << /Type /Catalog /Pages 268 0 R /Metadata 278 0 R /PageLabels 266 0 R >> endobj 294 0 obj << /S 1407 /L 1491 /Filter /FlateDecode /Length 295 0 R >> stream endstream Rather, it involves readers with the material by using real-world examples, with emphasis on the analysis and interpretation of the end result of financial reporting - financial statements. Sections 5 through 8 explain the use of ratios and other analytical data in equity J I��,���b �� ǀ]%(��sA)n �� X <> Gibson does not oversimplify financial statements. 0000000788 00000 n ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT Financial statements are the basis and formal annual reports through which the corporate management communicates Financial information to its owners and various other external parties which include-investors, tax authorities, government, employees etc. Inherent weaknesses in financial statements 745 3.1 Historical figures 3.2 Limited predictive value 3.3 Limited qualitative information A FULL financial statement contains two major parts: an income account and a balance sheet. %���� <>/Font<>/ExtGState<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 720 540] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> 0000002169 00000 n Sometimes, the contents of the financial statements are manipulated by … Share & Embed "Analysis AND Interpretation OF Financial Statements" Please copy … 0000004151 00000 n The income statement, which reports on how much a firm earned in the period of analysis! 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<> 0000004709 00000 n Analysis and interpretation of financial statements Introduction Financial statements are analysed to enable the user of those statements to be better able to interpret the information they provide. It is basically a study of relationship among various financial facts and figures as given in a set of financial statements, and the interpretation thereof to gain an insight into the profitability and operational efficiency of the firm to To perform fi nancial analysis, you will need to know how to use common-sized fi nancial statements, ... Financial Statement and Ratio Analysis LO1 The Financial Statements 1.3 Statement of Cash Flows Basis for analysis and interpretation of financial statements is complete set of financial statements prepared (audited) based on commonly acceptable accounting principles and standards. x��UMo�@�#��T�Ve�o�U ���b��TJz�"�"�����.���&Q^�w�3��0t/�䤛�� ��)�1�i�8p�9R� ��h��ݺ�e�%`�lù\W�>�[��-H��U q���m�Lj@3Pֺ�5,A��/ڭn��g����b��y^΀egԧ���)~7�"Y�>8&.� �8�(��0]l ���� JFIF ` ` �� 6Exif II* &. Accounting data collected over time is used to prepare the three key financial statements, which includes the cash flow statement, balance sheet, and income statement, also known as the profit & loss statement. H��VMo�@��W̩�,���#$4! endobj Liquidity ratiosmeasure the ability of a company to pay off its current obligations. 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Consistent accounting procedure. 5 0 obj This Chapter also defines a wide variety of ratios derived from financial statement … The income account shows the earnings for the period covered, while the balance sheet sets forth "the financial position" at the closing date. the operations of the firm is called ‘Financial Statement Analysis’. First, there are the fixed assets , which include the long-term assets of the firm, such as plant, equipment, land and buildings. A financial statement is an organized collection of data according to logical and conceptual framework. stream Entity must include following key elements as part of its complete sets of financial statements. 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Statement A this is a written verbal explanation of the operations of the company during a financial year Balance Sheet B this reflects whether or not the shareholders can rely on the financial statements Cash-Flow Statement C this reflects the profit/loss of the company for the year 4 Directors' Report D this reflects the effect of the operating, To examine how asset value is measured, let us begin with the way assets are categorized in the balance sheet. work for financial statements and the place of financial analysis techniques within the framework. This Chapter explains the calculation and interpretation of common size balance sheets as well as common size income statements. ]���v$��f3�� �� ���HZr��� Analysis consists in breaking down a complex set of facts or figures into simple elements. Many people find it challenging to use a company's financial statements as management tools until they understand how to interpret them. GET THIS BOOK Financial Statement Analysis. <> 0000000691 00000 n This project aims to analyze the financial statement analysis of Starbucks. Analysis and interpretation of financial statements help in determining the liquidity position, long term solvency, financial viability and profitability of a firm. Gripping IFRS Financial Analysis and Interpretation 743 Chapter 25 Chapter 25 Financial Analysis and Interpretation Contents: Page 1. This is the interpretation stage. ipU���&��o��F��-���_j�z��1��% Ɇ endobj Download Analysis AND Interpretation OF Financial Statements. Financial Statement Analysis and Interpretation is a very vital instrument of good management decision-making in business enterprise. Common size financial statements are an important tool in financial statement analysis. Most common types are: Current Ratiomeasures the extent of the number of current assets to current liabilities. Financial Statement.pdf - 1 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS Unit Structure 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.0 Objectives 279 0 obj << /Linearized 1 /O 281 /H [ 788 1034 ] /L 416066 /E 68711 /N 84 /T 410367 >> endobj xref 279 17 0000000016 00000 n In the relative financial statement of the companies. Basic Financial Statements! Generally, the ratio of 1 is considered to be ideal to depict that the company has sufficient current assets in order to repay its current liabilities. 4 0 obj 0000003015 00000 n 3 0 obj The main task of an analyst is to perform an extensive analysis of financial statements Three Financial Statements The three financial statements are the income statement, the balance sheet, and the statement of cash flows. Reliability of Figures. endobj financial ratio analysis we select the relevant information -- primarily the financial statement data -- and evaluate it. Ratios: The term ‘accounting ratio’ is used to describe significant relationships which exist between … Financial Analysis is the process of identifying the financial strength and weaknesses of the firm by properly establishing relationship between items of financial statements. After making analysis of the financial statements, the next step is to use mind for forming an opinion about the enterprise. 0000004368 00000 n 3! j܁ �[6�e���,����Y�� >�q��D!�kT���V��3�V���e^���Gg���.���(hGs݄@I�m��k�����f���R+�$���;�}1yc�I�s��;T1UM�ј�X**�a�_�� �:�c|IGw������oxw�{Ώ1�F���P!�N�d��S7*�'? Without financial statement analysis in investment decisions, an enterprise is likely to make decisions, which could spell its doom. This chapter focuses on the interpretation and analysis of fi nancial statements. ��4�:~����=V"QMgm�n����˻ Horizontal analysis is the method of function statement analysis which represents the percentage income and percentage decrease. �f&�����@�XC#@N�@h��! Statement of comprehensive income 0000001822 00000 n A) When all the figures in a balance sheet are stated as … These three core statements … The statement of cash flows, which reports on cash inflows and outflows to the firm during the period of analysis! Financial Statements: Analysis and Interpretation Meaning of Financial Statements 0000004788 00000 n The process of reviewing and analyzing a company’s financial statements to make better economic decisions is called analysis of financial statements. The term 'financial analysis' also termed as 'analysis and interpretation of financial statements', denotes to the process of determining financial strengths and limitations of the company by establishing strategic affiliation between the items of the balance sheet, P&L A/c and other operative data. 0000050198 00000 n 2 0 obj Aswath Damodaran! 0000003245 00000 n %PDF-1.5 Buy Analysis and Interpretation of Financial Statements Notes PDF Online. Analysis and interpretation of financial statements are an attempt to determine the significance and meaning of the financial statement data so that a forecast may be made of the prospects for future earnings, ability to pay interest, debt maturities, both current as well as long term, and profitability of sound dividend policy. In other words, the process of determining financial strengths and weaknesses of the entity by establishing the strategic relationship between the items of the balance sheet, profit and loss account, and other financial statements. Which of the following statements are false? The term ‘analysis’ means the simplification of financial data by methodical classification of the data given in the financial statements… Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. Section 3 provides a description of analytical tools and techniques. ,^ey�C�H JY$z�P;�Ҧ�D5�^40�dJMU�ϴ��I�OIrN0U�tD(T\�&2�)�“���p���ɫ�rK�#3H�����D��IR!�[\&\Z�H�m�R��� 4R�8�1M6�*K�Ql J�@��4���d� r]@��9����X (�����)� �JJ�Ꙕ���Fv00 H�b```"�jAd`B�ĂFi���?�\`�.b{�c�=�����Mho�n����Ƹ�y %PDF-1.3 %���� A stream The financial statement in which accountants summarize and report asset value is the balance sheet. Guide to Financial Statement Analysis. Ratios deal with figures from Financial Statements therefore cannot be considered in isolation. Analysis and interpretation of financial statements help in determining the liquidity position, Introduction 745 2. ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF 0000001800 00000 n trailer << /Size 296 /Info 277 0 R /Root 280 0 R /Prev 410356 /ID[<7c3bdc80943b17adc182ea6c5a58a65d>] >> startxref 0 %%EOF 280 0 obj << /Type /Catalog /Pages 268 0 R /Metadata 278 0 R /PageLabels 266 0 R >> endobj 294 0 obj << /S 1407 /L 1491 /Filter /FlateDecode /Length 295 0 R >> stream endstream Rather, it involves readers with the material by using real-world examples, with emphasis on the analysis and interpretation of the end result of financial reporting - financial statements. Sections 5 through 8 explain the use of ratios and other analytical data in equity J I��,���b �� ǀ]%(��sA)n �� X <> Gibson does not oversimplify financial statements. 0000000788 00000 n ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT Financial statements are the basis and formal annual reports through which the corporate management communicates Financial information to its owners and various other external parties which include-investors, tax authorities, government, employees etc. Inherent weaknesses in financial statements 745 3.1 Historical figures 3.2 Limited predictive value 3.3 Limited qualitative information A FULL financial statement contains two major parts: an income account and a balance sheet. %���� <>/Font<>/ExtGState<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 720 540] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> 0000002169 00000 n Sometimes, the contents of the financial statements are manipulated by … Share & Embed "Analysis AND Interpretation OF Financial Statements" Please copy … 0000004151 00000 n The income statement, which reports on how much a firm earned in the period of analysis! 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