Introduction And Meaning Of Financial Statement Analysis
Financial statement analysis is an act of reviewing and examining the financial statements of the firm (such as balance sheet, income statement, cash flow statement etc.) to analyze the profitability, liquidity, solvency and operational efficiency of the firm. Different methods like horizontal analysis, vertical analysis, ratio analysis, leverage analysis etc. are used for financial statement analysis. It is very important to know the financial situation and to evaluate the performance of the company.
Importance Of Financial Statement Analysis To The Management
* It reveals the financial status of the firm
* Helps to analyze profitability, liquidity, and solvency position of the firm
* It helps the management for making future financial plans and policies
* It provides important financial data and information which are useful for managerial decision making
Importance Of Financial Statement Analysis For Shareholders
Financial statement analysis provides information regarding profitability and operational efficiency of the business firm. It helps the shareholders to make decision regarding holding or selling of company's shares.
Importance Of Financial Statement Analysis To The Creditors
Financial statement analysis reveals solvency and liquidity position of the company. It helps the creditors to decide either to extend loans or not.
Also Read:
Importance Of Cash Flow Statement
Importance Of Funds Flow Statement
Meaning and importance of ratio analysis
Importance Of Financial Statement Analysis To The Investors
Prospective investors analyze the company's earning capacity and expected future return on investment before investing their fund. Financial statement analysis is important to attract new investors in the company because it provides important financial data and information.
Importance Of Financial Statement Analysis To The Government
Information and financial data collected from financial statement analysis are used by the government authorities for taxation and price regulation purpose.
