Financial Analysis Financial Tools - 983 Words

A. What financial tools described in this chapter can help you make better financial decisions? Financial tools are means we use to show us our financial situation and where we can predict our financial situation to be in the future. Some of the financial tools to use are financial statements, assessments of risk and time value, and the budget process. Financial statements show us a formal record of financial activities. Components of a financial statement involve balance sheets, income statements, and cash flow statements.Financial statements give us an accurate picture of our financial situation. A balance sheet is a list of all assets, liabilities, and equity at a given point in time, however this is not a record of performance over time like a income or cash flow statement. This is beneficial if you want to check on a given month or period of time. To get an overall picture you would need to look at an income statement or a cash flow statement. A cash flow statement is a summary of actual cash flows for a period of time. Cash flow statements can show sources of income and r egularity. A income statement is a summary statement of income and expenses for a period. This will show your net profits or losses for the time period you are evaluating. Assessments of risk and time value helps you make financial decisions but evaluating what your money is worth now verses what it will be worth in the future. If you take, for example, $1,000 and invest it at 3% for a year at the endShow MoreRelatedRatio Analysis Is A Powerful Tool Of Financial Analysis Essay2049 Words   |  9 PagesRatio Analysis Ratio Analysis is a powerful tool of financial analysis. The absolute figures that are reported in the financial statements do not provide an understanding of the financial well-being of the firm. Ratios help in creating a qualitative judgement about the financial position of the company by making use of quantitative relationships. 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