1. Explain the three steps of financial analysis at the organizational level. 2.

Question

1. Explain the three steps of financial analysis at the organizational level.

2. What is the purpose of creating a balance sheet? List the three general classifications of the balance sheet and possible categories under these classifications.

3. For the statement of operations, list the main classifications and the possible categories under the classifications.

4. What types of organizations use the statement of changes in net assets, and why?

5. What is the statement of cash flows? The statement is divided into three segments; list each category.

Explanation / Answer

Following are the steps of financial analysis in an organization:

Step 1:

At this step, the organization sets the objectives for financial analysis and choose appropriate financial analysis tools to obtain results. These tools can be ratio analysis, trend analysis, horizontal analysis or any other analysis an organization feels appropriate.

Step 2:

At this step, all the calculations are done using a financial analysis tool.

Step3:

At this state, the results drawn from step 2, are interpreted. The interpretations should be in line with the objectives of the firms.

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