Professional Documents
Culture Documents
According to howard and upton “ Although my own financial statement expressed in money
value might be though of as financial statements, the term has come to be limited by most
accounting and business writers to mean the ‘ balance sheet and profit and loss account’.
in the required manner for the purpose of use by managers and external stakeholders.
about financial position of the company that they own. Financial statement analysis is
useful both to help anticipate future condition and, more important, as a starting point
for planning action that will improve the firm’s future performance. Financial
statement analysis generally begins with a set of financial ratios designed to reveal a
company’s strengths and weaknesses as compared with other companies in the same
industry, and show whether its financial position has been improving and decrease
weaknesses of the firm by properly establishing relationships between the item of the
balance sheet and the profit and loss account. Financial analysis helps to determine
smooth operation of the project over its entire life cycle. The two major aspects of
financial analysis are liquidity analysis and capital structure analysis for which ratio is
obligations. Capital structure analysis is done to see long term solvency i.e. the
in balance Sheet and Profit and Loss Account is often in the form of raw data rather
than as information useful for decision making. The process of converting the raw
data contained in the financial statements into meaningful information for decision
other hand, if these are loses, capital invested to the extent of loss is lost or dissipated
ability to pay creditors and lenders is weakened and the business concern operates
under a ‘handicap’.
Lenders
Investors
Management