Financial Performance Analysis

REVIEW OF LITERATURE Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. It is a tool in decision-making processes related to stocks, bonds, and other financial instruments. Analysis of financial statements provides valuable information for managerial decision. Financial analysis is commonly called analysis and interpretation offinancial statement. Analysis of financial statements means establishing relationship between the items in financial statements for determining the financial strength and weakness of business. It is the process of scanning of the financial statements to judge profitability solvency, stability, growth of prosperity of a firm. According to Myer “Financial statement analysis is largely a study of relationship among various financial factors in a business as disclosed by a single set of statements and study of these factors shown in a series of statements”. Thus financial analysis is the use of financial statements to analyzea company’s financial position and performance, and to assess future financial performance. In short financial analysis is the process of examining the composition of financial statements for getting valuable information about the business. It is a technique of x-raying the financial position as well as progress of a firm. Financial analysis includes analysis and interpretation of financial statements. The word analysis literally means ‘to break into parts’. In the context of financial statement, analysis is the process of breaking down a complex set of figure into simple statements in order to have a better understanding. It is a critical examination of financial transactions effected during a definite period. The term interpretation ‘literally’ means to explain the meaning and significance of data. In the context of financial analysis, interpretation means to explain the