Various tools used to do Financial Statement Analysis

1. Various tools used to do
Financial Statement Analysis
Presented By:
Reduanul Islam;
Id: 211005007; MBA

2. Financial Statement Analysis (FSA)
- The process of examining an organization's
financial statements position for decision-making
purposes.

3. Four different core tools of FSA
1. Horizontal Analysis
2. Vertical Analysis
3. Ratio Analysis
4. Cash-flow Analysis

4. Horizontal Analysis
- Also known as trend analysis and it is the
comparison of past data over several accounting
periods to shows the growth of the company.
- Calculation formula: [(Non-base years – Base
year) ÷ Base year] × 100

5. Vertical Analysis
- List each line item of income statement as a percentage of a
base. The first line of the statement always shows the base
figure at 100%, with each following line item representing a
percentage of the whole.
- Formula: (Statement line item / Base figure) × 100

6. Ratio Analysis
Ratio analysis is a quantitative method of gaining insight
into a company's liquidity, operational efficiency, and
profitability by studying its financial statements such as
the balance sheet and income statement.

7. Few indicators that uses to predict Ratio
Analysis:
1. Current Ratio = Current Assets(CA)/Current
liabilities(CL)
2. Quick Ratio = CA – Inventory/CL
3. Debt-Equity Ratio = Long-term debt/Long-
term debt + Equity

8. Cash-flow Analysis
- Determines a company's working capital, the
amount of money available to run business
operations and complete daily transactions.
- Calculation formula: (Current Assets – Current
Liabilities).

9. Other tools that also used to do FSA
i. Common Size Statements;
ii. Average Analysis;
iii. Fund Flow Analysis;
iv. Cost Volume Profit Analysis etc.

10. Conclusion
If we wanted to examine our company’s growth and
financial position of past several years or a particular
year and quantitative expression of the company, then we
must needs to follow the tools that uses to do financial
statement analysis.

11. References
1. https://www.indeed.com/career-advice/career-
development/horizontal-vertical-analysis
2. https://www.investopedia.com/terms/r/ratioanalysis.asp
3. https://www.netsuite.com/portal/resource/articles/financial-
management/cash-flow-analysis.shtml
4. https://accountlearning.com/tools-techniques-financial-
statement-analysis/