Financial Statement Analysis

‘Financial Statement Analysis’ is a process pinpointing the financial strengths and weaknesses of any company via establishing the relationship between the items present in its balance sheet and those in its profit and loss account.

Many varying methods are used when analysing financial statements.  Amongst these are comparative statements, schedule of changes in working capital, common-size percentages, funds, trends and ratios analysis.

 Financial statements are prepared to meet external reporting obligations and more usefully for procative managerial decision making purposes. However, the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. Different conclusions and opinions can be applied based on professional points of view. In most cases the information provided in the financial statements is of immense use in helping to decide a company’s future decisions through analysis and interpretation of financial statements.

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