Financial Reporting and Company Analysis

This chapter turns issuer analysis into an exam framework. Series 7 questions use financial statements, ratios, earnings quality, and valuation measures to test whether you can interpret a company’s condition instead of just reciting formulas.

The right approach is to move from the statements themselves to the ratios built from them and then to the earnings, cash-flow, and valuation measures that help compare one issuer with another.

In this section

• Financial Statements
  Review the balance sheet, income statement, and cash flow statement and what each reveals about issuer condition.
• Financial Ratios
  Use liquidity, profitability, and leverage ratios to compare issuers and interpret financial strength.
• Earnings, Cash Flow, and Valuation
  Evaluate earnings quality, cash flow, EPS, and common valuation measures used in issuer analysis.