This chapter can be divided into two parts. The first part deals with financial analysis, where managers use financial data to appraise the financial standing of their own firm and competing firms. But financial analysis requires (a) an understanding of what accountants are trying to do when they construct financial statements, and (b) systematic procedures for summarizing large quantities of financial data. Data from Executive Paper Corporation is used to illustrate financial analysis procedures. The second part deals with financial planning models that try to estimate the impact of important long-term financing and investment decisions on the future performance of the firm. These models are also useful in screening alternative financial strategies. Financial planning models are demonstrated using data from Executive Paper Corporation.
