It is basically used to find out the position of any company.it helps us to know the different types of user should invest their money in the company or not.
2. MEANING OF FINANCIAL
STATEMENT
Financial statement are prepared for the
purpose of presenting periodical view or
report on progress by management and
deal with the status of the investment in
the business and result achieved during
the period under view.
4. FINANCIAL STATEMENT ANALYSIS
FSA is largely a study of relationship
among the various financial factor in a
business , as disclosed by a single set of
statements , and a study of trends of
these factors , as shown in a series of
statement.
5. Types
External Analysis: The analysis is done by
outsider who do not have access to the data of the firm
. Like- investors , editors , govt. agency , general public
.
Internal analysis: The analysis is done by
internal person who have easy access to the data of the
firm. Like- management , employee .
6. OBJECTIVES AND NEED
To obtain a better understanding of the firm
To identify the financial strength and weakness of the
firm
To check the movement of fund
To measure operational efficiency
To know business solvency position
To know the growth potential of the firm
To have inter firm comparison
7. Limitations
It depends on the intention of its user
It ignores qualitative aspect of business
It ignore non monetary factor
It does not provide a complete accommodation to the
other accounts like management accounting , cost
accounting , human resources
It contents with the Historical data
8. BASIS COMPARATIVE
STATEMENT
COMMON SIZE
STATEMENT
TREND
ANALYSIS
SCOPE This technique is
popularly applied by
all the financial
organizations .
This technique is not
popularly applied by all
the financial
organizations.
The technique is not as
popular as comparative
statement .
BASE YEAR
/DATA
Generally ,
comparison is made
with the last year.
All data are converted in
% form taking total of
asset/ liability/ sales
etc. of the year
Data may be compared
with any year . The year
chosen for comparison is
taken as base year .
DATA Data of two or more
financial year are used
Data of one financial
year are used
Data of two or more
financial years are used
Direction of
comparison
Data are compared
horizontally
Data are compared
vertically
Data are compared
horizontally as well as
vertically
Presentation
of data
Data are presented in
absolute form
Data are presented in %
form
Data are presented in %
form