2006-10-26 13:04:03 · 4 answers · asked by Anonymous in Business & Finance ➔ Other - Business & Finance
actually, it really depends on what you're trying to accomplish. in a trending analysis, you will need to rely on previous year's financials unless you can reconstruct them yourself.
you may not want to rely on them if you are trying to forecast for the next year because anything could change.
2006-10-26 13:33:33 · answer #1 · answered by loveholio 5 · 0⤊ 0⤋
Because there are many crafty ways to hide financial information and the financial report can be very deceiving. Also, you never know what factors influenced a company's performance. The previous year could have yielded some bad breaks for the company or some good luck that may not repeat every year. These could include weather (unusually good or bad), a drastic change in fuel costs or labor costs which for the current year could change with layoffs or equipment downsizing. The best bet is to use several years if possible and look for trends and get as much independant information on the company as you can.
2006-10-26 13:20:55 · answer #2 · answered by bob_fly_68 1 · 0⤊ 0⤋
If the company is a publically traded company, you can be 99% sure that the information is correct. There are laws that punish the executives of the company if the financial report is incorrect. Plus, most companies hire independent accounting firms to analyze their numbers.
If this question is in reference to analyzing a company for the purpose of investing, you must do research to look at the future earnings potential of that company. Last years numbers are no indication of what that company can do in the future
2006-10-26 13:20:43 · answer #3 · answered by Anthony M 1 · 0⤊ 0⤋
financial reports are a snap shot in time. Trend analysis is usually a better indicator in conjunction withStatement of Cash Flows
2006-10-26 14:05:08 · answer #4 · answered by Smilin' Fred 4 · 0⤊ 0⤋