CFA Level I Financial Statement Analysis

Updated for the 2026-2027 CFA® Level I curriculum.

Financial Statement Analysis is one of the largest topic areas at CFA Level I. It covers how companies report income, assets, liabilities, and cash flow, and how analysts use that information to evaluate performance. This hub organizes KeyPoint's complete set of CFA Level I financial statement analysis study notes so you can find the right concept fast and move through the curriculum in order.

Quick Answer

This hub organizes KeyPoint's 2026 CFA Level I financial statement analysis study notes across all 12 official readings and 55 canonical topics. It covers everything from the purpose of financial statements to income statement and balance sheet analysis, cash flow statements, inventory and long-term assets, income taxes, reporting quality, ratio analysis, and financial statement modeling. Use it as your starting point, then click into individual notes for detailed teaching, examples, and practice questions.

Key Takeaways

• CFA Level I financial statement analysis spans 12 official readings in the 2026 curriculum.

• KeyPoint covers the topic with 55 canonical study notes, each focused on one concept.

• The material ranges across reporting foundations, income statements, balance sheets, cash flow, inventory, long-term assets, liabilities and equity, income taxes, reporting quality, ratio analysis, and modeling.

• Each child note includes its own Quick Answer, worked example, common traps, and practice question.

• This hub is a navigation tool. Go to the individual notes for exam-ready teaching.

• Use Previous and Next links on each note to follow the confirmed curriculum sequence.

What Financial Statement Analysis Covers in CFA Level I

The FSA topic area builds a working knowledge of how financial statements are prepared, what they show, and how to analyze them. The 2026 curriculum groups this material into a few practical themes.

• Foundations. What financial statement analysis is, who uses it, and where the underlying information comes from.

• Income statements and balance sheets. How companies recognize revenue and expenses, calculate earnings per share, and report assets, liabilities, and equity.

• Cash flow analysis. How the cash flow statement connects to the income statement and balance sheet, and how to evaluate a company's cash generation.

• Inventory and long-term assets. How inventory valuation and long-term asset accounting affect reported results.

• Liabilities, equity compensation, and income taxes. How leases, employee compensation plans, and income tax accounting show up on the financial statements.

• Financial reporting quality. How to judge whether reported results reflect economic reality, and how to spot warning signs of manipulation.

• Financial analysis techniques. How to use ratios and other tools to evaluate a company's performance and compare it to peers.

• Financial statement modeling. How analysts build forecasts from historical financial statements.

Each theme maps to one or more official readings below. This section gives you the big picture. The child notes handle the detailed teaching.

How to Use These Financial Statement Analysis Study Notes

1. Start with your current reading. Find the reading you are studying in your curriculum or study provider, then locate it below.

2. Use Quick Answers and Key Takeaways for fast review. Each child note opens with a direct answer and a bulleted summary.

3. Work through examples and practice questions on the child notes. This hub does not include teaching examples or practice questions. Each canonical note does.

4. Follow Previous and Next navigation. Each note links to the one before and after it in the confirmed sequence, so you can move through the topic in order.

5. Return here when you switch readings. This hub stays a quick way to jump between sections of the FSA curriculum.

Introduction to Financial Statement Analysis

Start here to connect an analytical task with the information and steps it requires. The notes separate the six-phase framework from the roles of analysts, then explain how filings, notes, commentary, and audit reports support a conclusion. They also introduce reporting-system differences and sources outside a company's annual and interim reports, so you can assess both the numbers and their context.

• Financial Statement Analysis Framework

• Roles of Financial Statement Analysis

• Regulatory Filings, Financial Statement Notes, Management Commentary, and Audit Reports

• Alternative Financial Reporting Systems and Standard-Setting Developments

• Information Sources for Financial Statement Analysis

Analyzing Income Statements

Income statement analysis connects reported profit with the transactions, timing choices, and estimates behind it. These notes explain revenue and expense recognition, separate recurring performance from unusual items, and develop basic and diluted earnings per share. Common-size analysis then helps you compare margins across periods or companies, while keeping accounting choices and differences in business models in view.

• Revenue Recognition Principles and Applications

• Expense Recognition and Capitalized vs Expensed Costs

• Non-Recurring Items and Changes in Accounting Policies

• Basic and Diluted Earnings per Share

• Common-Size Income Statements and Income Statement Ratios

Analyzing Balance Sheets

Balance sheet analysis starts with understanding what reported assets and obligations represent and how they are measured. These notes address intangible assets, goodwill, financial instruments, and non-current liabilities before bringing them together in common-size statements and ratios. Use this reading to connect a reported balance with its disclosures and to explain how measurement choices affect comparisons of financial position.

• Intangible Assets: Reporting and Disclosures

• Goodwill: Reporting and Analysis

• Financial Instruments: Reporting and Disclosures

• Non-Current Liabilities: Reporting and Disclosures

• Common-Size Balance Sheets and Balance Sheet Ratios

Analyzing Statements of Cash Flows I

This reading explains how accrual-based results connect with actual cash movements and changes in balance sheet accounts. Work through the relationships among the three statements, then use income statement and balance sheet data to prepare operating cash flow under the direct and indirect methods. The final notes address conversion between methods and reporting differences between IFRS and US GAAP.

• Links Between the Cash Flow Statement, Income Statement, and Balance Sheet

• Direct and Indirect Cash Flow Statement Preparation

• Converting Cash Flows from the Indirect to Direct Method

• IFRS vs US GAAP Cash Flow Statements

Analyzing Statements of Cash Flows II

After learning how the cash flow statement is prepared, turn to what it reveals about operating strength and funding needs. These notes cover reported and common-size cash flow analysis, free cash flow to the firm, free cash flow to equity, and performance and coverage ratios. Focus on the question each measure answers and the assumptions needed before comparing companies.

• Reported and Common-Size Cash Flow Statement Analysis

• Free Cash Flow to the Firm, Free Cash Flow to Equity, and Cash Flow Ratios

Analysis of Inventories

Inventory accounting affects both the asset reported on the balance sheet and the cost recognized when goods are sold. These notes explain valuation methods, write-downs, price-change effects, and disclosures that help an analyst compare inventory policies. Use them together to trace a change in inventory costs through reported profit, asset values, and ratios, while keeping the applicable reporting framework in view.

• Lower of Cost and Net Realizable Value

• Inventory Valuation Methods

• Inflation and Deflation Effects on Inventory, Financial Statements, and Ratios

• Inventory Disclosures and Analyst Considerations

Analysis of Long-Term Assets

The way a company obtains an intangible asset influences whether and how it appears in the financial statements. These notes compare purchased assets, internal development, and business acquisitions, then examine impairment, derecognition, and disclosures for property, plant, equipment, and intangible assets. Connect each accounting treatment with its effect on assets, expenses, and the ratios an analyst uses.

• Purchased, Internally Developed, and Acquired Intangible Assets

• Impairment and Derecognition of PPE and Intangible Assets

• PPE and Intangible Asset Disclosures and Analysis

Topics in Long-Term Liabilities and Equity

Long-term commitments can affect reported leverage, expenses, and future cash needs in different ways. These notes cover leases from both parties' perspectives and explain defined contribution, defined benefit, and stock-based compensation plans. The disclosure note brings the reporting together so you can identify obligations, understand compensation arrangements, and interpret information that sits beyond a single headline balance sheet figure.

• Lease Accounting for Lessees and Lessors

• Employee Compensation Plans: Defined Contribution, Defined Benefit, and Stock-Based Compensation

• Long-Term Liabilities and Share-Based Compensation Disclosures

Analysis of Income Taxes

Income tax analysis connects the expense reported in the accounts with taxable income and taxes payable. These notes explain temporary and permanent differences, deferred tax assets and liabilities, and effective, statutory, and cash tax rates. Work through the distinctions before interpreting tax reconciliations: temporary differences can create deferred tax balances, while permanent differences affect the relationship between accounting profit and taxable income without reversing later.

• Accounting Profit, Taxable Income, Taxes Payable, and Income Tax Expense

• Temporary vs Permanent Differences and Tax Bases

• Deferred Tax Assets and Liabilities

• Effective, Statutory, and Cash Tax Rates

• Deferred Tax Disclosures and Effective Tax Rate Reconciliation

Financial Reporting Quality

A useful analysis considers both whether reporting represents the business faithfully and whether the underlying results are sustainable. These notes cover the reporting-quality spectrum, conservative and aggressive choices, management incentives, and mechanisms that constrain low-quality reporting. They also examine non-GAAP presentation and accounting warning signs, helping you build a reasoned assessment without treating a single red flag as proof of fraud.

• Financial Reporting Quality vs Quality of Reported Results

• Spectrum of Financial Reporting Quality

• Conservative vs Aggressive Accounting

• Management Motivations and Conditions for Low-Quality Reporting

• Mechanisms That Discipline Financial Reporting Quality

• Non-GAAP Measures and Presentation Choices

• Accounting Methods Used to Manage Earnings, Cash Flow, and Balance Sheet Items

• Accounting Warning Signs and Detecting Manipulation

Financial Analysis Techniques

Financial analysis techniques turn reported amounts into measures that help answer a defined business question. These notes cover analytical tools, the main ratio categories, relationships among ratios, DuPont decomposition, industry-specific measures, and the use of ratios in forecasts. Study the interpretation alongside each calculation, because a change that looks favorable in isolation can carry a different meaning when assessed with related measures.

• Financial Analysis Tools and Techniques

• Activity, Liquidity, Solvency, and Profitability Ratios

• Relationships Among Ratios and Company Evaluation

• DuPont Analysis of Return on Equity

• Industry-Specific Ratios

• Ratio Analysis for Forecasting Earnings

Introduction to Financial Statement Modeling

Financial statement modeling brings accounting relationships and forward-looking assumptions into one connected forecast. These notes develop a sales-based model and explain how analyst biases, competitive forces, inflation, and deflation affect projected prices and costs. They also address the forecast horizon, helping you distinguish the detail supported by near-term assumptions from the broader judgments required for projections further into the future.

• Sales-Based Pro Forma Financial Statement Model

• Behavioral Biases in Analyst Forecasts

• Porter’s Five Forces and Forecasting Prices and Costs

• Forecasting Sales and Costs Under Inflation or Deflation

• Forecast Horizons and Long-Term Projections

FAQs About Financial Statement Analysis