Practical Application: Analyzing Financial Statements

Instructor: Scott Tuning

Scott has been a faculty member in higher education for over 10 years. He holds an MBA in Management, an MA in counseling, and an M.Div. in Academic Biblical Studies.

Analyzing financial statements is a basic business skill that is fundamental to understanding an organization's position in the market. Despite an intimidating name, analyzing a financial statement is relatively straightforward.

The Financial Fixer

Judy is a ''fixer.'' More formally, she works for a nationwide department store as a turn-around leader. She travels around and assumes temporary control of stores that are floundering financially, but still have the potential for returning to profitability. In many ways, she is the last stop before a store closes permanently. If Judy can't turn things around, no one can.

Although there is a lot of data that Judy can consider, there are a few key pieces of a financial statement that would be of particular importance to someone in her role. You can review the material in the lesson Financial Statement Analysis if you need a quick refresher.

  • When assessing the store's profitability and potential, what types of financial documentation will Judy examine?
  • Is there a difference between a financial statement, a balance sheet, and a profit & loss statement? If so, what is different?
  • What can Judy determine from performing basic calculations from the financial documentation she is reviewing?

The Raw Data

As Judy begin reviewing the financials of her current store, she takes note of the the following data:

Assets Liabilities
$254,645 $296,871

(in 1,000s)

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