Financial statement analysis

                    Financial statement analysis

The main aim of the financial statement is to provide information

and understand the financial aspects of the firm.

                                      

1.Income statement

                             Income statement is also called as profit and loss account, which reflects the operational position of the firm during a particular period.

2.Balance Sheet

                              It explain the financial position of the firm during the year.Position statement helps to ascertain and understand the total assets, liabilities and capital of the firm. One can understand the strength and weakness of the concern with

the help of the position statement

3.Cash flow Statement

                                         The statement of cash flow reports the sources of cash inflows and cash outflows during an accounting period.It will act like a connecting statement between income statement and balance sheet.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

1. Comparative Statement Analysis

A. Comparative Income Statement Analysis
B. Comparative Position Statement Analysis

2. Trend Analysis
3. Common Size Analysis

Comparative Statement Analysis

                                   Comparative statement analysis is an analysis of financial statement at different period of  time. This statement helps to understand the comparative position of financial and

operational performance at different period of time.

Comparative Balance Sheet Analysis

                          Comparative balance sheet analysis concentrates only the balance sheet of the concern at different period of time. Under this analysis the balance sheets are compared with previous

year’s figures or one-year balance sheet figures are compared with other years.

Trend Analysis

                   The financial statements may be analysed by computing trends of series of information. It
may be upward or downward directions which involve the percentage relationship of each
and every item of the statement with the common value of 100%

Common Size Analysis

Another important financial statement analysis techniques are common size analysis in
which figures reported are converted into percentage to some common base