Page 24 - DBP5043

FINANCIAL ANALYSIS

Introduction

A firm operates from year to year and at the end of its financial year,
the management shareholders, creditors, potential investor, government
and other parties would be interested in its performance. They are
concerned about whether the company is making any profits or whether
the company is able to increase its profits compared to previous year.

What is financial analysis?

Financial analysis is the assessments of a firm’s past, present, expected
future financial performance. The analysis is made based on the firm’s
financial statement. It involves looking at historical performance.
Financial analysis helps an individual to check whether a business is
doing better this year than it was last year, or whether it is doing better
or worse than other companies in the same industry.

Objective of financial analysis

The main objective of financial analysis is to identify the firm’s strengths
and weaknesses. It is necessary for a firm to identify its strengths so that
it can capitalize on these strength and corrective actions to improve its
weaknesses.

Types of financial statement

A) Statement of Comprehensive Income

B) Statement of Financial Positions

C) Cash Flow Statement

D) Notes to account