Theoretical Framework
Conventional managerial financial decisions and corporate valuations are based on financial statements analyses. This is because the two essential manuscripts, the monthly income statement and balance sheet statements illustrate an official sheer portrait of a company’s financial status. The two manuscripts or documents contain comprehensible company profile in terms of figures revealing vital information like a ‘blood test or an x-ray’ as it reflects Net Income, Total Assets, Total equity, Total Debt, Total Liabilities, Total Revenue, Total Cost, Current assets, Current Liabilities, Net present value, and Market Value among others. Otherwise, the financial statement illustrates company status in terms of liquidity, profitability, and solvency (Pratt, 2003; Hunt, Weygandt, Kieso, and Kimmel, 2003; Albrecht, Stice, Stice, and Skousen, 2002; Kiyosaki and Lechter, 2002; Ross, Westerfield, Jordan, 1996):
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