Assignment
Financial Statement Ananlysis
Meaning
Preparation of financial statements i.e. Balance Sheet and Trading and Profit and Loss Account in the module titled ‘Financial Statements of Profit and Not for Profit Organisations’. After preparation of the financial statements, one may be interested in analyzing the financial statements with the help of different tools such as comparative statement, common size statement, ratio analysis, trend analysis, fund flow analysis, cash flow analysis, etc. In this process a meaningful relationship is established between two or more accounting figures for comparision. In this lesson you will learn about analysing the financial statements by using comparative statement, common size statement and trend analysis.
Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. By financial statements we mean two statements :
(i) Profit and loss Account or Income Statement
(ii) Balance Sheet or Position Statement
These are prepared at the end of a given period of time. They are the indicators of profitability and financial soundness of the business concern. The term financial analysis is also known as analysis and interpretation of financial statements. It refers to the establishing meaningful relationship between various items of the two financial statements i.e. Income statement and position statement. It determines financial strength and weaknesses of the firm.
Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. Thus, the analysis and interpretation of financial statements is very essential to measure the efficiency, profitability, financial soundness and future prospects of the business units.
Purpose
Measuring the profitability
The main objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining
Meaning
Preparation of financial statements i.e. Balance Sheet and Trading and Profit and Loss Account in the module titled ‘Financial Statements of Profit and Not for Profit Organisations’. After preparation of the financial statements, one may be interested in analyzing the financial statements with the help of different tools such as comparative statement, common size statement, ratio analysis, trend analysis, fund flow analysis, cash flow analysis, etc. In this process a meaningful relationship is established between two or more accounting figures for comparision. In this lesson you will learn about analysing the financial statements by using comparative statement, common size statement and trend analysis.
Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. By financial statements we mean two statements :
(i) Profit and loss Account or Income Statement
(ii) Balance Sheet or Position Statement
These are prepared at the end of a given period of time. They are the indicators of profitability and financial soundness of the business concern. The term financial analysis is also known as analysis and interpretation of financial statements. It refers to the establishing meaningful relationship between various items of the two financial statements i.e. Income statement and position statement. It determines financial strength and weaknesses of the firm.
Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. Thus, the analysis and interpretation of financial statements is very essential to measure the efficiency, profitability, financial soundness and future prospects of the business units.
Purpose
Measuring the profitability
The main objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining