WRITING A FINANCIAL STATEMENT ANALYSIS REPORT FOR A POTENTIAL USER

The financial analyst should research, analyse and evaluate the company’s consolidated financial results. He/she should then compare such analysis and evaluation with that of a competitor or more working in the same industry group. The competitor should have the similar size (measured by total assets, sales turnover, number of employees, and/or capital employed) of the main company. The competitor should also have the same legal form as that of the main company (e.g. both companies should be Public Limited Company).

It is essential that a financial analyst should write out a well-organised and structured financial statements analysis report in an appropriate format and style to an identified user of accounting information, using headings and sub-headings to indicate topics discussed. This report should include the key groups of ratios, and identify the key issues, explanations, and main findings obtained from the calculated ratios, horizontal and vertical analyses, and other sources of information. Then, the analyst should come to appropriate conclusions, implications, limitations, and recommendations. A suggested approach to write a good report is demonstrated below.

I. Abstract * Report Objective; * Main Findings. II. Summary of the Basic Company Information
Before looking at any of the different analysis techniques, it is good to spend some time doing a little bit of background research into the company you are investigating. This will help to put the technical analysis into an appropriate context and allow a greater level of insight into any anomalies the analysis throws up. * Brief History; * Description of Industry Membership, Main Business and Principal Locations; * Any Exceptional Recent Events that Could Impact on the Consolidated Financial Statements;