Financial Statement Analysis

Financial Statement Analysis

The term ‘financial statement analysis ‘refers to the process of determining the financial position of the firm by reviewing and analyzing the items of the balance sheet, profits and loss account, cash flow statement, funds flow statements, etc. The purpose of the financial analysis is to understanding the financial health of company so as to judge the profitability of the firm. Just like a doctor examines his patient by recording is body temperature, blood pressure, etc, before making the conclusion regarding the illness and giving his treatment, a financial analyst uses various types of tools to judge the soundness of the firm.

Tools/ Methods or Devices of Financial Analysis

  • Comparative statements
  • Trend analysis
  • Common size statements
  • Fund flow analysis
  • Cash flow analysis
  • Ratio analysis
  • Cost-volume- profits analysis

 

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