ABSTRACT
This chapter aims to consider univariate methods of analysis. Management within companies can, of course, use a variety of techniques to control a company's short term financial position: like referring to inventory control and cash budgeting models. The main point to appreciate is that basically the external user of company financial statements needs the same information as internal managers, but has access to inferior data. The conventional approach to financial statement analysis is univariate and variables are examined one-by-one. A number of studies have been undertaken by academics referring systematically to a series of individual ratios. Using a matched pair research design, these have been quite successful in discriminating between failed and non-failed companies. However, they appear to rely heavily on general financial indicators, which seem to reflect symptoms rather than causes. The best discriminators were working capital funds flow/debt and net income/total assets.
