Whenever we discuss of Analysis, we generally discuss in context of numbers.
But any Analyst who had been in the industry for years will tell you that numbers can tell only part of the story.
Having a good management team, awesome products, or be the first to open a new market are elements that will have a huge impact on the success of any company that cannot be grasped by looking at financial statements only.
Any experienced finance professional will tell you that those internal and external factors are what gives meaning to the numbers.
When revenue is growing year over year, how can you tell if this is due to a higher customer demand, better products, good salespeople, or any other factor?
Answering such questions is key to understanding what you’re doing right and what you’re doing wrong, and lead you to take actions that will improve your ability to analyze.
The answer of such questions is in the analysis of the context of the company under study.
It is done through the analysis of contextual elements such as target market, competitors, suppliers, the management team, the location of your stores, and many more.
It’s in the light of those elements that you can truly conclude if the figures within the financial statements are indicating a good performance, a good strategy, or not.
So, remember that CONTEXT is just as important as the numbers themselves.