Firstly, Juan would have to prepare a Statement of Cash flows and a Statement of
Owner’s Equity.
Limitations
•Past performance, good or bad is, not necessarily a good indicator of what willhappen with a customer in the future.
•The more, out-of-date a customer’s financial statements are, the less value they
are to the credit department.
•Without the notes to the financial statements, credit mangers cannot get a clearpicture of the scope of the credit risk they are considering.
•The financial statement analysis is limited by the fact that financial statements are
“window dressed” by creative accountants.
•The financial statement analysis just provides a snapshot of a business’ financial
health but not the complete moving picture.
•It is also difficult to say whether a company is healthy seeing its financialstatements because that depends on the nature and size of the business.