The article, “understanding the basics of financial statements analysis”, by R. David Mautz, Jr. and Robert J. Angell, is effective in financial management. This article provides a logical format of the methods to use in analyzing financial statements. The article begins with an overview of financial statements analysis highlighting the dimensions of financial performance such as liquidity, efficiency, capital structure and profitability. The article then describes the horizontal and vertical financial statement analysis methods. This analysis method is an effective way of writing the article for the reader to understand the basics of financial statements analysis.
There are examples in the article that enable the reader to understand the methods of analyzing financial statements clearly. After analyzing the methods of financial analysis, the article provides the reader with common ratios that are effective in financial management. The authors illustrate these methods for the reader to understand their application in financial management. In addition, the article provides the DuPont analysis as a popular approach in determining the factors that affect performance in an organization. Finally, the article concludes with the remarks that financial statement analysis is an effective way to determine performance in an organization because it outlines the areas that need improvement. This facet is a logical way of writing where information flows orderly for the reader to understand.
The article has a sound research base because it provides a detailed analysis of the methods of financial statements analysis. The article provides adequate analysis of the methods in analyzing financial management. However, the research is not timely because it provides data of past years as far as the year 2000. These years are too far in the past and may not be accurate predictors of the future. Organizations are dynamic and they change with time and, therefore, using extremely outdated data may not be useful in current financial management.
The article, however, has practical and viable information that management can apply in current organizations. The horizontal and vertical analyses are applicable methods in contemporary organizations. They determine performance and are useful in financial management. The financial ratios are also feasible methods of determining organization performance. They specifically pinpoint areas that the management needs to improve to achieve target performance. Therefore, the article provides feasible information for financial management.
The article is detailed, and this aspect is an advantage to the reader because he or she finds information on one article. It gives the reader an understanding of the basics in financial statements at a glance. From the beginning of the article, it is possible for the reader to determine the methods of financial statements analysis. These are well outlined, and exhibits are available for the reader to relate the written information. This clear outline gives the reader an opportunity to skim through the article and get the relevant information faster. The weakness with the article is that it provides so many exhibits for the reader to check. These examples may confuse the reader while reading ruling out their real meaning in the article. These many exhibits could prevent the reader from getting the information as intended.
The article contains text aids to enable the reader understand information in the article. There are clearly illustrated exhibits that enable the reader to understand the text. These exhibits are crucial in providing an elaborate comprehension of the text.
References
Mautz, R. D., & Angell, R. J. (2006). Understanding the basics of financial statement Analysis. Commercial Lending Review, 21(5), 27-34.