15-09-2017, 01:01 PM
Analysis of financial statements (or financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions. These statements include the income statement, balance sheet, statement of cash flows and a statement of changes in equity. The analysis of financial statements is a method or process that involves specific techniques to evaluate the risks, performance, financial health and future prospects of an organization.
It is used by a variety of stakeholders, such as credit and capital investors, government, the public, and decision makers within the organization. These stakeholders have different interests and apply a variety of different techniques to meet their needs. For example, investors are interested in the organization's long-term earnings power and perhaps in the sustainability and growth of dividend payments. Creditors want to make sure that interest and principal are paid on the debt securities of organizations (eg bonds) when it expires.
Common methods of financial statement analysis include fundamental analysis, DuPont analysis, horizontal and vertical analysis, and the use of financial indices. Historical information combined with a number of assumptions and adjustments to financial information can be used to project future performance. The designation of an accredited financial analyst is available to professional financial analysts.
It is used by a variety of stakeholders, such as credit and capital investors, government, the public, and decision makers within the organization. These stakeholders have different interests and apply a variety of different techniques to meet their needs. For example, investors are interested in the organization's long-term earnings power and perhaps in the sustainability and growth of dividend payments. Creditors want to make sure that interest and principal are paid on the debt securities of organizations (eg bonds) when it expires.
Common methods of financial statement analysis include fundamental analysis, DuPont analysis, horizontal and vertical analysis, and the use of financial indices. Historical information combined with a number of assumptions and adjustments to financial information can be used to project future performance. The designation of an accredited financial analyst is available to professional financial analysts.