Financial statement analysis of firms presents you an intuition on how the corporation is conducting its program. For stockholders who are interested in finding out whether the management is properly utilizing the corporation’s resources to create shareholder wealth, a financial analysis of a corporation will be able to help investors come to proper decision. As such, financial analysis of a corporation has several items, including capital budgeting and capital structure decisions when the analysis of financial statements is done for the management of the firm. The peformane of competitors within the industry, and the viability of business’s future can be evaluated through financial statement analysis.

Viability of a project can be found out through a financial statement analysis which can be performed by financial analysts employed by the firm. Projects that would bring in the maximum amount of revenues over the course of time over similar projects are recommended by financial analysts to the management. Expected returns from projects are provided by financial analysts to the management. Analysts employed by the business can also give the management suggestions on whether to issue new stocks or borrow money to fund new projects. Financial analysts will recommend whether a new project should be undertaken or invest the money somewhere else, essentially performing capital budgeting decisions.

Financial Institutions will carry out a financial statement analysis of a business to see how strong its fundamentals are, and then use their findings to either make good investments for themselves, or pass on ther findings to their clients. Large investment corporations have their own in house financial analysts who advice to their employers on what stocks might be a good buy, these recommendations are usually private and only available within the company. A corporation’s stock price can be affected based on a financial analyst recommendations as these recommendations are used by stockholders to determine whether it is a good investment. If a financial analyst after evaluating a company’s financial statements finds that the company isn’t performing well, he might suggest owners to sell the stock if they already own it. If such a suggestion were to be made public, the price of that business’s share could see its value drop moderately.