TOOLS FOR FINANCIAL STATEMENT ANALYSIS:

1. Common Size Financial Statements

2. Trend Analysis

3. Comparative Financial Statements

4. Cash Flow Statement

5. Fund Flow Statement

6. Ratio Analysis

The distinction between Vertical and Horizontal Analysis of financial data.

What is the meaning of Analysis and Interpretation?

Analysis and interpretation is all about presenting financial data which is self-explanatory and easy to understand. It helps users of accounting information in assessing the status of financial performance of the business for a time period and enables them to take proper decisions regarding the fiscal policy of the firm.

Importance of Financial Analysis?

Financial statements such as Balance Sheets, Income sheets and other sources of financial data provide ample information on the various expenses and sources of profit, loss and income which is helpful in determining the financial status of a business. Financial data is not making any meaningful contribution until it is analyzed. There are various methods that help in analyzing financial statements and make it useful for various accounting users.

Following reasons are essential for financial analysis of accounts

1. It is very helpful in determining the financial viability and profit earning capacity of the firm.

2. It is helpful in evaluating the business solvency in the long term

3. It is useful in comparing the financial status of a firm in comparison to other competitor firms