Financial analysis
Financial analysis examines financial statements and other relevant information to assess performance, position, liquidity and risk. Ratios, trends and comparisons help identify issues, but conclusions must connect figures to commercial causes. Consider accounting policies, one-off events, business activities, inflation and the limitations of historical information. An isolated percentage is a starting point for investigation rather than a complete explanation.
Worked example
A falling gross margin may reflect selling-price reductions, rising purchase costs, sales mix changes or an inventory error; additional evidence distinguishes these causes.
Common mistake
Do not claim a ratio movement proves a single cause when several explanations are plausible.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Financial statement analysis