From the course: Corporate Financial Statement Analysis

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Use AI to spot limits in financial comparisons

Use AI to spot limits in financial comparisons

From the course: Corporate Financial Statement Analysis

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Use AI to spot limits in financial comparisons

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How can artificial intelligence be used to help a financial analyst understand the limitations associated with a particular financial statement analysis? Well, artificial intelligence can highlight the impact of accounting assumptions and practices on the reported numbers. For example, AI can determine whether the company's depreciation life or bad debt assumptions are in line with the assumptions being made by other companies in the same industry. AI can also flag large, one-time accounting adjustments, such as a write-off, and perform a with-without analysis to quantify the impact of these adjustments. Using mergers and acquisitions prices from the same industry, AI can also generate estimates about the relative magnitude of non-recorded intangible assets. AI can also look at a company's financial profile to look for signs of earnings management. Earnings management, well, reported financial statement numbers have the power to frame opinions about companies. And because reported net…

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