MEANING OF FINANCIAL

STATEMENTS

FINANCIAL STATEMENTS ARE THE OUTCOME OF

SUMMARISING PROCESS OF ACCOUNTING.
THUS, THE TERM FINANCIAL SATEMENT GENERALLY
REFERS TO THE TWO STATEMENTS:
(I)THE POSITION STATEMENT OR BALANCE SHEET
(ii) THE INCOME STATEMENT OR PROFIT AND LOSS A/C
FINANCIAL STATEMENT
ANALYSIS
 Financial statement analysis (or
financial analysis) is the process of
reviewing and analyzing a company's
financial statements to make better
economic decisions. It uses analytical
or financial tools to examine and
compare financial statements in order
to make business decisions.
Objectives of financial
statement analysis
 Assessment of Past Performance
 Assessment of current position
 Prediction of profitability and
growth prospects
 Prediction of profitability and
growth prospects
 Assessment of the operational
efficiency
Tools of financial statement
analysis
The following methods are commonly used:
 Comparative statements
a) Comparative profit and loss account
b) Comparative balance sheet

 Common size statements

a) Common size profit and loss account
b) Common size balance sheet
 Trend analysis
 Fund flow analysis
 Cash flow analysis
 Ratio analysis