Financial Statement Analysis and Reporting: Key Aspects Unveiled
Explore the world of financial statement analysis and reporting, including its processes, importance, needs, parties involved, modern approaches, and the advantages of comparative statement analysis. Dive into the realm of evaluating financial performance and making informed decisions.
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Presentation Transcript
Financial Reporting & Financial Statement Analysis Sem-VI Financial Statement Analysis Chiranjit Ghosh Department of Commerce
FINANCIAL STATEMENT ANALYSIS The process of identifying the strength & weakness of the concern by the truly setting up the relationship between the items that are usually contained in the financial statements
NEEDS OF FINANCIAL STATEMENT ANALYSIS Investment Decision Assessment of Liquidity Assessment of operating Excellence Assessment of Profitability Assessment of Performance Managerial Decision Allocation of Resources
Parties to Financial Statement Analysis Management Proprietor/Shareholders/Partners Creditors Bankers Other Lenders Government Customers Employees
Modern Approach to Financial Statement Analysis Comparative Statement Common-size Statement Trend Analysis Fund Flow Statement Cash Flow Statement Ratio Analysis Budgetary Control
Comparative Statement Analysis Comparative Statement or Comparative Financial Statement refers to a comparative study of components or elements or items of financial statements (Balance Sheet & Income Statement) for two or more years or with that of other entities. It is a historical summary of the same item or group of items of consecutive Income Statement or Balance Sheet of an entity.
Advantages of Comparative Statement For Evaluation of Financial Performance Earmarked Changes Highlighting nature of changes Indicating Strength & Weakness Comparison with other entities Helps to make Forecasting & Planning Key Financial Statistics Key Help in Decision Making Trend Analysis
Disadvantages of Comparative Statement Historical records Price Level Changes Difficult to make Inter-firm Comparison Difficult to make detailed analysis Chance of providing Misleading information
