FINANCIAL

STATEMENT
ANALYSIS

WHY FSA

What is the financial position of firm at a

given point of time?
How has the firm performed financially over
a given period of time?
What have been the sources and uses of
cash over a given period?

OBJECTIVES OF THE FSA

To

assess the present profitability and operating

efficiency of the firm as a whole as well as for
its different departments and segments.

To

find out the relative importance of different

components of the financial position of the firm.

To

identify the reasons for change in the

profitability/financial position of the firm

To

assess the short term as well as the long term

liquidity position of the firm.

TYPES/METHOD OF FINANCIAL
ANALYSIS
On the basis of
material used

External analysis
Internal analysis

On the basis of
Horizontal analysis
performance of work Vertical analysis
system or modus
operation of process
Basis of objective

Long term analysis

Short term analysis

PARTIES INTERESTED IN FINANCIAL

STATEMENT ANALYSIS
PARTIES

AREA OF INTEREST

SHAREHOLDERS OR
INVESTORS

PROFITABILITY, FINANCIAL POSITION, FUTURE

PROSPECTS OF BUSINESS

MANAGEMENT

SHORT TERM AND LONG TERM SOLVENCY, LAIBILITY

OF THE CONCERN,PROFITABILITY IN RELATION TO
TURNOVER AND INVESTMENTS

EMPLOYEES

PROFITABILITY, FINANCIAL POSITION

CREDITORS

PROFITABILITY, FINANCIAL POSITION

BANKERS

PROFITABILITY, FINANCIAL POSITION

GOVERNMENT

PROFITABILITY, FINANCIAL POSITION

RESEARCHERS

PROFITABILITY, GROWTH, FINANCIAL POSITION AND

FUTURE PROSPECTS