What does financial statement analysis involve?

Financial statement analysis primarily revolves around evaluating financial information to make informed decisions. This process involves examining the numbers presented in an organization's financial statements—such as the balance sheet, income statement, and cash flow statement—to assess the company's financial health, operational efficiency, and profitability.

By analyzing various financial metrics and ratios derived from these statements, stakeholders such as investors, creditors, and management can gain insights into the company’s performance over time. These evaluations help in comparing the company's performance against industry benchmarks or competitors, thus facilitating strategic decision-making regarding investments, lending, or operational adjustments.

The other options listed denote important functions within accounting and finance but do not embody the essence of financial statement analysis. Recording daily transactions is part of bookkeeping, preparing budget forecasts relates to financial planning, and calculating tax obligations involves compliance aspects of accounting. Each may utilize financial data, but they do not focus on the interpretative and evaluative analysis that characterizes the study of financial statements.