2. Financial statement analysis is an attempt to determine the
significance and meaning of data contained in the financial
statements so that prediction may be made regarding the
future earnings , ability to meet its liabilities and
profitability of the business.
3. ๏ฝ โFinancial statement is a process of evaluating
relationship between component parts of financial
statements to obtain a better understanding of firmโs
position and performance.โ
4. ๏ To estimate the earning capacity of the firm.
๏ To assess the financial position and financial
performance of the firm.
๏ To determine the long term solvency of the firm as well
as short term liquidity of the firm.
๏ To determine the debt capacity of the firm.
๏ To examine the operating performance of the firm.
๏ To decide about the future prospectus of the firm.
5. A )ON THE BASIS
OF MATERIAL
USED
EXTERNAL
ANALYSIS
INTERNAL
ANALYSIS
6. ๏ฝ 1.EXTERNALANALYSIS:-is made by those
who do not have a access to the detailed
records of the company. For e.g. investors &
creditors.
๏ฝ 2.INTERNALANALYSIS:-is conducted by
those who have access to the books of
accounts and other related information from
the records of the company.
7. B) ON THE BASIS
OF MODUS
OPERANDI
HORIZONTAL
ANALYSIS
VERTICAL
ANALYSIS
8. ๏ฝ 1. HORIZONTALANALYSIS:-If the financial
statements are reviewed for a number of
years,the analysis is known as horizontal
analysis.
๏ฝ 2.VERTICALANALYSIS:-Is that type of
analysis where financial statement are
reviewed of one period (year) only.
10. ๏ฝ 1.LONG TERM ANALYSIS:-This analysis is
made in order to study the long term
financial stability, solvency and liquidity as
well as profitability earning capacity of a
business concern.
๏ฝ 2.SHORT TERM ANALYSIS:-This is made to
determine the short term solvency, stability
and liquidity as well as earning capacity of
the business.