PPT - Analysis of Financial Statements Commerce Notes | EduRev

Accountancy Class 12

Created by: Nipun Tuteja

Commerce : PPT - Analysis of Financial Statements Commerce Notes | EduRev

 Page 1


Financial Statement Analysis
Page 2


Financial Statement Analysis
Business Survival:
There are two key factors for business survival:
•
Profitability 
•
Solvency 
•
Profitability is important if the business is to 
generate revenue (income) in excess of the 
expenses incurred in operating that business.
•
The solvency of a business is important 
because it looks at the ability of the business in 
meeting its financial obligations.
Page 3


Financial Statement Analysis
Business Survival:
There are two key factors for business survival:
•
Profitability 
•
Solvency 
•
Profitability is important if the business is to 
generate revenue (income) in excess of the 
expenses incurred in operating that business.
•
The solvency of a business is important 
because it looks at the ability of the business in 
meeting its financial obligations.
Financial Statement Analysis
•
Financial Statement Analysis will help business 
owners and other interested people to analyse 
the data in financial statements to provide them 
with better information about such key factors for 
decision making and ultimate business survival.
Page 4


Financial Statement Analysis
Business Survival:
There are two key factors for business survival:
•
Profitability 
•
Solvency 
•
Profitability is important if the business is to 
generate revenue (income) in excess of the 
expenses incurred in operating that business.
•
The solvency of a business is important 
because it looks at the ability of the business in 
meeting its financial obligations.
Financial Statement Analysis
•
Financial Statement Analysis will help business 
owners and other interested people to analyse 
the data in financial statements to provide them 
with better information about such key factors for 
decision making and ultimate business survival.
• Financial Statement Analysis is the 
collective name for the tools and 
techniques that are intended to provide 
relevant information to the decision 
makers. The purpose of the FSA is to 
assess the financial health and 
performance of the company. 
• FSA consist of the comparisons for the 
same company over the period of time and 
comparisions of different companies either 
in the same industry or in different 
industries.
© Mary Low
Page 5


Financial Statement Analysis
Business Survival:
There are two key factors for business survival:
•
Profitability 
•
Solvency 
•
Profitability is important if the business is to 
generate revenue (income) in excess of the 
expenses incurred in operating that business.
•
The solvency of a business is important 
because it looks at the ability of the business in 
meeting its financial obligations.
Financial Statement Analysis
•
Financial Statement Analysis will help business 
owners and other interested people to analyse 
the data in financial statements to provide them 
with better information about such key factors for 
decision making and ultimate business survival.
• Financial Statement Analysis is the 
collective name for the tools and 
techniques that are intended to provide 
relevant information to the decision 
makers. The purpose of the FSA is to 
assess the financial health and 
performance of the company. 
• FSA consist of the comparisons for the 
same company over the period of time and 
comparisions of different companies either 
in the same industry or in different 
industries.
© Mary Low
Financial Statement Analysis
Purpose:
•
To use financial statements to evaluate an 
organisation’s
–
Financial performance
–
Financial position
–
Prediction of future performance
•
To have a means of comparative analysis across time 
in terms of:
–
Intracompany basis (within the company itself)
–
Intercompany basis (between companies)
–
Industry Averages (against that particular industry’s averages)
•
To apply analytical tools and techniques to financial 
statements to obtain useful information to aid decision 
making.
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