Financial statements and analysis provide key information about a company's financial position and performance. Financial statements include the income statement and balance sheet. Financial analysis involves interpreting relationships between different financial statement items to assess a company's strengths, weaknesses, and changes over time. Common methods of financial analysis include comparative statements, common size statements, trend analysis, and ratio analysis. These tools help management and outsiders understand a company's profitability and financial condition.

1. FSA
Umamaheswari

2. Meaning of financial statement
• Basically refers two statements- Income
statement and profit and loss account
• Shows the results of operations during a certain
period and the position statement / Balance
sheet showing the assets, liabilities, capital of a
business enterprises as on a particular date
• Financial reports.
• Convey to the management and the outsiders the
profitability and financial position of a concern.

3. Financial analysis
• Refers to the process of determining financial
strengths and weeknesses of a concern by
establishing strategic relationship between the
items of the balance sheet/ profit and loss
account
• Analysis and interpretation of financial statement
• Data in an understandable manner is analysis and
making comments on the analysis is called
interpretation.

4. Types of financial analysis
• Horizontal analysis: comparison of financial data of a
firm once a period of time
• Vertical analysis: Study of relationship of the various
items in the financial statements of one accounting
year. Static analysis
• External analysis: Analysis done by outsiders who do
not have access to the detailed accounting records of
the business enterprise. Investors, creditors,
government agencies, public
• Internal analysis: Analysis done by a person who have
access to the detailed accounting records of a business
firm. Executives and employees of the organisation.

5. Methods of Financial analysis
• Comparative statement
• Common size statement
• Trend analysis
• Ratio analysis
• Fund flow analysis
• Cash flow analysis

6. Comparitive statement
• Financial data from different periods
• Elements are shown in a comparitive form so
as to give an idea of financial position at two
or more periods.
• More than one accounting period.

7. Uses of comparative statement
• Provides a comparison of an entity’s financial
statement once multiple periods, so that one
can determine trends.
• Provides a comparison of expenses to
revenues
• Useful for predicting future performance
• Increase or decrease in terms of percentages

8. Two statements
Comparative income statement
• gives an idea of the progress of a
business enterprise over a period of time
Comparative balance sheet
• Study of trends of the same items, group
of items

9. Common size income statement
• A statement where the balance sheet items
are expressed as the ratio of each asset to
total assets and each liability to total liabilities

10. Trend percentages
• The financial statements may be analysed by
comparing trends of series of information.
• This method determines the direction
upwards or downwards and involves the
computation of the percentage relationship
that each statement item because to the same
item in base year

11. Report
• Re refers “again”, port means “to carry”.
• Report means carrying the information again.
• Objectives
• Communication
• Record
• Legal requirements
• Public relations
• Measuring performances
• Control

12. Kinds of reports
• Based on purpose
• External reports : For outsiders.
• Internal reports: Insiders of the organisation.
• Top level, middle level, low level
• Based on nature:
• Enterprise reports: all activities of the
organisation.
• Control reports: personal performance and
economic performances

13. According to period
• Routine reports:
• Day to day report
• Special reports:
• When routine is not enough, then special reports
• Functions:
• Operating reports: operations of the concern
• Financial reports: financial position of the
concern.