Financial Statement Analysis UNITII Financial Statement Analysis Meaning

Financial Statement Analysis UNIT-II

Financial Statement Analysis • Meaning: The term financial statement analysis is known as analysis and interpretation of financial statements, refers to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data.

Definition: • According to the words of Myers “Financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set- of statements, and a study of the trend of these factors as shown in a series of statement”

TYPES OF FINANCIAL ANALYSIS ON THE BASIS OF MATERIALS USED ON THE BASIS OF MODUS OPERAND

TYPES OF FINANCIAL ANALYSIS ON THE BASES OF MATERIAL USED EXTERNAL ANALYSIS INTERNAL ANALYSIS

TYPES OF FINANCIAL ANALYSIS ON THE BASIS OF MODUES OPREAND HORIZONTAL ANALYSIS VERTICL ANALYSIS

METHODS OR DEVICES OF FINANCIAL ANALYSIS § Comparative statement § Trend analysis § Common-size statement § Fund flow statement § Cash flow statement § Ratio analysis § Cost-volume-profit analysis

Comparative statements • The Comparative balance sheet analysis is the study of the same item, group of items and computed items in two or more balance sheet of the same business enterprise on different dates. • The changes in periodic balance sheet items reflect