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Benchmarking industry analysis

Using these ratios, we can determine how efficiently a company is generating revenue and how quickly it’s selling inventory.

balance sheet analysis

Using the above financial ratios derived from the balance sheet will help you assess the solvency and leverage of a business.

In our course on analysis of financial statements, we explore all the above metrics and ratios in great detail.

#3 Cash flow statement analysis

With the income statement and balance sheet under our belt, let’s look at the cash flow statement and all the insights it tells us about the business.

The cash flow statement will help us understand the inflows and outflows of cash over the time period we’re looking at.

Cash flow statement overview

The cash flow statement, or statement of cash flow, consist of three components:

Each of these three sections tells us a unique and important part of the company’s sources and uses of cash of the time period being evaluated.

Many investors consider the cash flow statement the most important indicator of a company’s performance, and it’s hard to imagine that until only recently companies didn’t even have to file a cash flow statement.

Today, investors quickly flip to this section to see if the company is actually making money or not, and what it’s funding requirements are.

It’s important to understand how different ratios can be used to properly assess the operation of an organization from a cash management standpoint.

In our Financial Analysis Course, we go over the different types of debt financing:

  • Bonds
  • Term debt
  • Syndicated loans and leasing
  • Preferred shares
  • Common shares

Below is an example of the cash flow statement and it’s three main components.  Linking the 3 statementstogether in Excel is the building block of financial modeling.  To learn more, please see our online courses to learn the process step by step.

cash flow statement analysis