From the course: Financial Accounting Part 2

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From the course: Financial Accounting Part 2

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Continue your financial accounting journey

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- You now know a lot about financial ratio analysis, cash flow analysis, and valuation, but here are some cautions. - First, financial ratio analysis can't do anything if the underlying financial statement data are not reliable. - If you are doing an important analysis, make sure that the data come from a reliable source. If the data comes from a person you can trust, good. If you aren't sure about the source, it's a good idea to have the numbers checked out by an outside party. An auditor. - For example, a friend of mine asked me to help him analyze the numbers for a business he was thinking of buying. It didn't take me long to realize that the financial numbers for this family business were hopelessly mixed in with personal family expenses such as groceries and gas and utilities and so forth. It was impossible to figure out how much income the business was actually generating. Without reliable data, it was extremely risky…

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