Fianacial Statement Analysis

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Submitted By monirulislam
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Introduction- What is a financial statement analysis:

Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.
There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis, and ratios analysis.
Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements.

Objectives- What manager need to analysis Financial statement:
1. Prepare and interpret financial statements in comparative and common-size form.
2. Compute and interpret financial ratios that would be most useful to a common stock holder.
3. Compute and interpret financial ratios that would be most useful to a short-term creditor
4. Compute and interpret financial ratios that would be most useful to long -term creditors.

1.Assessment Of Past Performance

Past performance is a good indicator of future performance. Investors or creditors are interested in the trend of past sales, cost of good sold, operating expenses, net income, cash flows and return on investment. These trends offer a means for judging management's past performance and are possible indicators of future performance.

2.Assessment of current position

Financial statement…...

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