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17.1 Describe the Need for and Purpose of Financial Statement Analysis

Need for Analysis​

Raw Numbers Don't Tell the Whole Story:

  • Need to calculate ratios
  • Need to compare periods
  • Need to compare to benchmarks
  • Need to identify trends

Purpose​

Analysis Helps:

  • Evaluate performance
  • Identify strengths and weaknesses
  • Make decisions
  • Communicate with stakeholders
  • Plan for future

Users of Analysis​

Internal Users:

  • Management
  • Owners
  • Employees

External Users:

  • Investors
  • Creditors
  • Suppliers
  • Government

Luxembourg Compliance Note​

Financial analysis in Luxembourg:

  • Important for all businesses
  • Helps with decision-making
  • Supports compliance
  • Useful for stakeholders

Think It Through​

Why is financial statement analysis necessary? What can it tell you that raw numbers cannot?