Econ

The success of a business entity depends on its ability to properly create, understand and analyze the financial statements. Financial statement analysis is important for understanding profitability and a firm's financial condition. These documents help a firm in many ways, such as in making better financial decision and creating a clearer picture to attract creditors and investors. In highlighting the financial numbers for CPI for the last 7 years, I will address the company’s value. Earnings or net income have increased steadily over the past seven years from 21 million dollars in 1999 to 62 million dollars in 2006. Retained earnings are a measure of profitability of the business to date, less all dividends declared on all classes of stock. Success will be reflected in an increased stock price.

Some important concepts to understand is that dividends are the cash flows actually paid to stockholders. Free cash flows are the cash flows available for distribution. Free cash flow to equity (FCFE) is the cash flow available to the firm’s common equity holders after all operating expenses, interest and principal payments have been paid, and necessary investments in working and fixed capital have been made.