Analysis of Financial Statements

Topic: Tools of FSA

Presented To: Anam Bukhari Presented By: M.Hashaam Roll No. : AM552381 Class: MBA ( B&F ) 4thSemester

Acknowledgment
First of all thanks of Allah who is most beneficent and the most merciful whose blessings are abundant and favors are unlimited. It is my pleasure to acknowledge the guidance and support of Teachers.

Financial Statement Analysis Financial statement analysis is the process of identifying of financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit &loss account,"

Tools of FSA

Ratio Analysis Trend Analysis

Trend Analysis Ratio Analysis

Tools

Ratio Analysis
Ratios are an analyst's microscope; they allow us get a better view of the firm's financial health than just looking at the raw financial statements. Ratios are useful both to internal and external analysts of the firm. It has followings: Liquidity Ratios Leverage Ratios Profitability Ratios Efficiency Ratios

Trend Analysis
Trend analysis involves the examination of ratios over time. Trends, or lack of trends, can help managers gauge their progress towards a goal. Furthermore, trends can highlight areas in need of attention. It includes followings: Horizontal Analysis Vertical Analysis

Horizontal or Index Analysis

This technique is also known as comparative analysis. It is conducted by setting consecutive balance sheet, income statement or statement of cash flow sideby-side and reviewing changes in individual categories on a year-to-year or multiyear basis. The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage. Such percentages are calculated by selecting a base year and assign a weight of 100 to the amount of each item in the base year statement

Vertical or Common Size Analysis

Vertical analysis is a technique for identifying relationship between items in the same financial statement by expressing all amounts as the percentage of the total amount taken as 100. In Vertical analysis, various components of the financial statements are standardized by expressing them as a percentage of some bases.