Financial Statement Analysis: Reading the Statements Together

The source statements in Uzbekistan

• balance sheet — Appendix 1 to Regulation No. 3567, statement of changes in equity — Appendix 3, cash flow statement — Appendix 4;
• for micro-firms and small enterprises — the balance sheet and the statement of financial results (para. 10);
• annual statements — no later than 1 March (para. 7).

Core ratios

• current ratio = current assets / short-term liabilities;
• equity ratio (financial independence) = equity / balance sheet total;
• return on sales = net profit / revenue;
• receivables turnover = revenue / average accounts receivable.

What each statement shows

The balance sheet shows the composition of assets and their sources of financing at a date. The statement of financial results shows income, expenses and profit for the period. The cash flow statement shows actual receipts and payments.

The notes disclose what the figures do not show: accounting policies, significant judgements and the breakdown of key line items.

• balance sheet — position at a date
• statement of financial results — result for the period
• cash flows — actual flows
• changes in equity
• notes and disclosures

Why the statements are read together

A company that is profitable on paper may still face a cash shortage: revenue has been recognised but not collected. Conversely, a positive cash flow may be driven by advances received rather than by operating results.

Only reading the statements together shows where the result comes from and how sustainable it is.

What the owner gets

An understanding of the sources of profit and its quality, an assessment of stability, a picture of debts and inventories, and a list of areas where the data raises doubts.

The last item often proves the most valuable: the analysis identifies the parts of the accounting that need to be put in order.

Our approach

We start by testing the reliability of the data, because analysing unreliable statements is pointless. Then we calculate the indicators over time and draw substantive conclusions.

Leader Audit is an audit firm with thirteen years of practice and more than 220 engagements completed across Uzbekistan.

Links between the statements

The balance sheet shows the position at a date, the statement of financial results shows the result for the period, and the cash flow statement shows the actual flows. Taken separately, each statement gives an incomplete picture.

The classic example is a reported profit alongside a shortage of cash. The explanation is usually found in settlements with customers or in inventories.

• balance sheet — position at a date
• financial results — result for the period
• cash flows — actual flows
• explanatory notes — quality of the data

The role of the explanatory notes

The notes are often read last, even though they disclose the composition of major line items, the nature of liabilities and the events affecting valuation.

Without them, comparing companies with one another is almost always misleading.

Who needs the analysis and why

The owner — to understand what lies behind the annual result. A bank or a partner — to assess reliability. Management — to find the areas where results are being lost.

The purpose sets the depth: an overview is enough for negotiations, while an investment decision requires a more detailed review.

How we carry out the review

We rely on the financial statements and accounting data, check that periods are comparable, explain the reasons for deviations and state our conclusions in practical terms.

If the data raises doubts, we say so directly: analysing unreliable statements creates false confidence.

How often a review makes sense

An annual review is essential for understanding the year's results, but many decisions call for a more frequent look — quarterly, and even more often in a fast-changing business.

Regularity matters more than depth: a short but repeated review reveals trends that are not visible in a single report.