Financial Statement Analysis means to use financial statements to assess a company's performance.There are many people including internal analysts and external analysts who use and evaluate financial statements.

Different people read financial statements for different objectives.Investors (stockholders)expect both dividends and an increase in the value of the stock they hold.Dividend payments depend on how profitable operations are，and stock prices depend on the market's assessment of the company's future prospect.So they are more concerned with profitability and future security price.

Creditors，however，expect to receive interest and the return of their loan principal.So they mainly want to know about short-term liquidity and long-term solvency.They also want to know about profitability because the profitable operations that drive stock prices to higher levels also provide the cash to repay loans and finance growth.

Both investors and creditors use financial statement analysis to(1)evaluate the company's past performance;(2)assess the current financial position;(3)and judge the future developing potentialities and the risks associated with it.

Most analysts rely primarily on publicly available information.The main body of public financial information is the annual reports.The annual reports including: (1)financial statements such as balance sheet，income statement，cash flow statement;(2)footnotes to the financial statements;(3)explanatory statements on financial condition;(4)the report of the independent auditors;(5)other corporate information.