The document discusses tools used in financial analysis. It defines financial analysis as interpreting a company's past, present and future financial condition. There are two types of financial analysis: single-period analysis which compares financial data from a single time period, and comparative or trend analysis which compares financial data across multiple periods to determine improvements or declines in financial position. Comparative ratio analysis involves comparing a company's financial ratios to industry averages to identify any deviations that should be investigated.

1. Tools in
Financial
Analysis
LESSON 10

2. TOPIC 1: Financial Analysis Defined
The purpose of financial analysis is to diagnose the
current and past financial condition of the firm to give
some clues about its future condition. The output of
financial analysis is a useful tool in decision - making.
Financial analysis may be defined as the process of
interpreting the past, present, and future financial
condition of the company.

3. TOPIC 2: Types of Financial Analysis
In the analysis of the financial standing of the firm, procedures may be
categorized as follows:
1. single - period analysis; and
2. comparative or trend analysis.
Single - Period Analysis Single - period analysis refers to comparison and
measurements based upon the financial data of a single period. It reveals
financial position and relationship as of a given point or period of time.
Comparative or Trend Analysis The comparative or trend analysis compares
and measures items on the financial statements of two or more fiscal periods.
The improvement or lack of improvement in financial position and in the
result of operation is determined.

16. TOPIC 3: Comparative Ratio Analysis
• Financial ratios may be made more useful by comparing them to the financial
ratios of other firms in the industry. If the firm's ratio is different from that of the
industry, the cause of the deviation should be investigated. .
• Comparisons may be made either with those of selected firms or with averages
for the industry. The data that will be used in the comparisons may be gathered
from annual surveys, such as those made for the top 1,000 Philippine
corporations. In addition, the publication requirements imposed on financial
intermediaries also provide the analyst with ready materials. Banks, insurance
companies, and financing firms, for instance, are required by the government to
have their financial statements published in the newspapers. Otherwise, the
Securities and Exchange Commission is a very useful source of financial data
relating to registered firms.