PRESENTATION

ON

FINANCIAL STATEMENT
ANALYSIS

BY
ABID HUSSAIN
(54622)
STRATEGIC MANAGMENT
Financial Statement
 Income Statement
 Balance Sheet
 Cash Flow Statement
Financial Analysis:
 Financial analysis is certain procedures and methods applied to
determine the past, present and also the future status and
performance of business with the aim to compare how the
business performed in the past…
Purpose Of Financial Statement
Analysis
• Tool to determining the future prospects as well as the plans
regarding the company.

• Used to identify the areas that need improvement and also solve
any type of financial and operational problem.

• The prime aim to analyze the current financial status and

performance of the company
How To Perform?

::TOOLS::

1. Vertical analysis __ Common-size Analysis

2. Horizontal analysis __ Trend Analysis

3. Ratio analysis __
Vertical Analysis:
 the vertical analysis of the balance sheet means every amount
on the balance sheet is restated to be a percentage of total
assets

 Vertical analysis of an income statement results in every

income statement amount being presented as a percentage of
sales
Vertical Analysis:
 If inventory is $100,000 and total assets are $400,000 then
inventory is presented as 25 ($100,000 divided by $400,000).
 If cash is $8,000 then it will be presented as 2 ($8,000 divided by
$400,000). The total of the assets will now add up to 100.
 If the accounts payable are $88,000 they will be presented as 22
($88,000 divided by $400,000).
 If owner’s equity is $240,000 it will be presented as 60 ($240,000
divided by $400,000).
Vertical Analysis:

 If sales were $1,000,000 they would be restated to be 100

($1,000,000 divided by $1,000,000).
 If the cost of goods sold is $780,000 it will be presented as
78 ($780,000 divided by sales of $1,000,000).
 If interest expense is $50,000 it will be presented as 5
($50,000 divided by $1,000,000).
Horizontal Analysis
 A horizontal financial statement analysis compares current
financial statements to a previous year

 This enables business owners and managers to review the

same month over several years to determinate if revenues,
expenses, assets or liabilities have increased, decreased or
stayed the same
Ratio Analysis
 It is used to compare the performance of the company with
other companies and also to understand whether a company
is improving or is on a downslide.
 Ratio analysis is useful, since vertical and horizontal financial
analysis is performed only using absolute figures, and in ratio
analysis ratios are used to analyze financial performance of
business.
 Thank you

Any Questions??

STRATEGIC MANAGMENT