Mind Map of Ratio Analysis and Forecasting

 What is the value of financial information and financial analysis?

The goal of financial analysis is to evaluate the degree to which a company’s financial information captures its underlying business reality. In other words, financial analyses use to assess the performance of a company in the context of goals and strategy.

Financial analysis is a valuable activity. It is not only determines the competitive advantage of a company, but also identifies red flags or potential fraud of financial statement. However, the results from analysis only let us draw conclusions about how a company has developed thus far. The figures and ratios that we obtain do give us an overview, but figures are not everything.

Financial data and non-financial data need to be interacted to forecast events, optimise operations and determine strategy. Therefore, a company's strategy and business model need to be known first in order to interpret the financial ratios and then uses the financial ratios and information to forecast its Future Financial Statements.

Let's go through the Mind Map to have big picture of Ratio Analysis and Forecasting.

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