CMA Part 2 Section A: Financial Statement Analysis

Vocabulary flashcards focusing on Comparative Financial Statement Analysis and the application of Common-size statements from CMA Part 2, Section A.

Comparative Financial Statement Analysis

The process of evaluating companies by examining financial statements through variants like common-size statements, base year statements, and growth rate reviews.

Common-size statements

Financial statements that recast all items as a $100\%$ percentage of a selected, usually the largest and most important, item on the statement.

Trend analysis

An analytical method enabled by base year statements used to review the growth rates of various elements within a financial statement over time.

Cash flow statement

A required financial statement under FASB that provides useful information regarding the financial performance of a company.

Uses of common-size statements

Comparing elements in a single year, analyzing multi-year trends, comparing businesses of differing sizes within an industry, and comparing performance against industry averages.

Actual comparability

An issue the analyst must resolve using judgment when comparing companies in different industries where statements reflect fundamental differences in conducting business.

Account structure variations

Differences in account distribution revealed by comparing companies to industry composite statistics, requiring analysts to explore and explain the reasons for the differences.