Financial analysis data is used by investors and analysts alike to determine the financial strength of a particular company, both in the present time and projected into the future. Most of this information can be gained from the income reports and balance sheets of the companies involved. Pertinent pieces of financial analysis data measure earnings, debt, assets, liabilities, cost of goods sold, and much more. These bits of data can then be compared to past numbers to spot trends or they can be used to calculate financial ratios, which allow comparisons between companies in the same industry.
The job of a financial analyst is to take all of the numbers associated with a certain company's finances and make reasonable inferences about that company's financial strength. These analysts have to decipher which pieces of information are the most relevant and how that information can be used to create a complete financial picture of a company. They use the various bits of financial analysis data available and turn it into something that can be easily understood by those inquiring about the company.
Important financial analysis data that can be gained from balance sheets includes the amount of assets and liabilities that a company currently has. In addition, income reports can give an idea about a company's profitability by comparing the amount of revenue that a company earns in contrast to the cost it incurs while producing whatever it sells to consumers. Accounts payable and receivable, which are transactions that have not yet been completed but will ultimately affect a company's bottom line, can also be measured.
Other important financial analysis data pertains to the loans that a company takes out in the course of doing business. The amount of debt that a company currently has is crucial information, as is the amount of interest owed on that debt. Another big part of the financial picture of a publicly-traded stock company is how much earnings it makes compared to the market price of its stock.
These finite pieces of financial analysis data can then be used to create the more intricate metrics used to analyze a company's financial outlook. Financial ratios are especially important in this process, since they can be used to put the data in some sort of context. For example, if the amount of debt that a company owes compared to its cash flow is far below industry standards, it indicates a possible area of financial concern.
