Financial Performance Analysis

Abstract

The purpose of analyzing a firm’s financial performance is to illuminate the economic health of an organization relative to its’ selected peer group and to assess the efficacy of managerial decisions and associate adverse consequences with root causes. Analyzing a company’s financial performance can be an important first step in understanding the outcomes of implemented strategies. This chapter discusses the underlying theory, core idea, depiction, process, insight or value created, and risks and limitations of financial performance analysis. Finally, the chapter discusses the case of Coca-Cola and PepsiCo and applies the steps of financial performance analysis to these two firms.