GARCIA, TRISTAN F.

ACC535M - G03

STANFORD CASE STUDY: INSIGHTS

The video lesson on Financial Statement Analysis (FSA) was a good example of how
advantageous the use of the case study method is. It not only helped us student viewers to
learn the theory and concepts behind FSA but it also allowed us to see the business case
through the lens of the decision makers and analysts in an interactive way.

Although the content of the video was merely an overview and was not a highly-technical
discussion of how to actually do an FSA, it did relay a lot of important points a decision maker
must keep in mind when tasked with such analyses. First, I learned that there are more details
to be uncovered behind the numbers presented on the face of the financial statement. Thus,
comparing the account balances of each company should not be done haphazardly but instead,
just like what Jill and Perry did in the case study, it should involve an in-depth investigation that
aims to further inquire about the real story behind each account. This could be done through
reading the Notes to the Financial Statement and/or through visiting the company, interviewing
its employees and owners, and through research.

Second, the lecture pointed out that before actually doing the FSA, a clear goal has to be
established by the decision maker as this would serve as a guide in determining which FSA
metrics and ratios would be deemed relevant. For example, a creditor would mainly focus on
company metrics that point towards liquidity while a potential investor would want to see
dividend payout ratios or other profitability measures. It would be a waste of resources to
analyze each and every part of the financial statement if doing so would not be relevant to the
decision at hand.

Third, doing an FSA is a cross-functional endeavor as it would sometimes necessitate the

involvement of experts outside the disciplines of accounting and finance to facilitate informed
judgement. Thus, not only should decision makers be humble enough to consult these experts,
they should also have broad and diverse backgrounds and experiences in order to further enrich
the analyses to be done.

With all these lessons in mind, I should now approach financial decisions in the workplace in a
systematic, patient and thorough manner. I will not quickly take figures at face value to avoid
premature and ill-informed decisions, and instead allot time for setting goals, reviewing
accounts, and consulting experts. I would also personally read a financial statement’s notes
before proceeding with a financial statement analysis.