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Abstract
Financial statements are prepared to help investors and creditors understand the financial history of a company and use that knowledge to predict the amount, timing and uncertainty of both future cash flows and price appreciation. While investment and credit decision models vary widely, most financial statement analyses rely on a common set of techniques. The purpose of this article is to introduce and illustrate those techniques. Researchers provide an overview of financial statement analysis, introducing the major dimensions of financial performance and common analytical techniques. Subsequent sections discuss popular financial ratios and their implications for management. They conclude by introducing the DuPont analysis approach. Financial statement analysis can be useful to commercial lenders, who serve as both evaluators and advisors. The value of financial statement analysis in assessing the creditworthiness of potential borrowers is self-evident. Ongoing analysis also provides an opportunity for lenders to protect the value of existing loans and enhance client relationships.