ABSTRACT
Access to financial information is obviously necessary if you are to financially evaluate a company, and this information is most likely to be contained within profit and loss and balance sheet statements. These statements provide a 'snapshot' on the financial health and standing of a company at a specific point in time. They are particularly important within strategic analysis because they provide the information for the calculation of financial ratios, which enable comparisons to be made with other companies in the same industry or sector. The ratios can be used to measure profitability, liquidity, corporate activity, the efficiency with which the company uses the assets that it has at its disposal, and how the stock market values the company. It is important that the data collected from the financial statements spans a time frame that enables a meaningful comparison to be made between companies and for financial projections to be made (e.g. 5 years). The collection of this financial data can be time consuming, especially so when it involves the dissection of the financial statements of competitors – although this is time well spent if it provides insight into the strategic decision-making processes of the key players within the industry or sector.
