The primary objective of financial accounting is to

The primary objective of financial accounting is providing information useful for decision makers, which has been the focus of the class.

You have already been assigned Wendy's to determine if they either recovered from the brink of failure or met their demise. Remembering that financial accounting is supposed to provide information useful for decision making, what information could have been gleaned from reviewing the companies' annual and/or quarterly financial statements during the five years leading up to the failure? Or, what information can we glean from reviewing our company's financial statements from the previous five years?

Ask yourself these questions:

How strong was the company's balance sheet?
How liquid was the company?
How were sales?
How strong were the components of income?
How had expenses lined up year over year? (Has any particular expense increased more than expected?)
What is included in the notes to the financial statements?
When analyzing a company, you cannot learn much information when merely comparing the company to itself, so you must also determine how the company performed in comparison to prior years, as well as how it is performing when compared to competitors. Remember apples to apples comparisons. If you are looking at your companies' 2018 financial statements, you should also be looking at the competitor(s)' financial statements for the same period of time.

Objectives 4.6 and 5.10 provide techniques for analyzing financial statements. However, keep in mind that not all ratios will be relevant for all companies. (Hint: Think of what may be most important to know for the industry in which your company operates.) The video for Objective 4.6 is included in this module.