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FM PPR - 014848

Financial statements are accounting reports issued periodically to present a company's past performance and current financial position. They include the balance sheet, income statement, and statement of cash flows. The balance sheet provides a snapshot of assets, liabilities, and equity at a point in time. The income statement shows revenues and expenses over a period of time. The statement of cash flows provides aggregate data on cash inflows and outflows during a period. Financial statements are prepared according to generally accepted accounting principles and audited by an independent third party.

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62 views13 pages

FM PPR - 014848

Financial statements are accounting reports issued periodically to present a company's past performance and current financial position. They include the balance sheet, income statement, and statement of cash flows. The balance sheet provides a snapshot of assets, liabilities, and equity at a point in time. The income statement shows revenues and expenses over a period of time. The statement of cash flows provides aggregate data on cash inflows and outflows during a period. Financial statements are prepared according to generally accepted accounting principles and audited by an independent third party.

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Aman poddar
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Introduction to financial

statement analysis
Definition
Financial statements are accounting reports issues
periodically to present past performance and
snapshot of firms assets and financing those assets.

• The annual report with financial statement must be


sent to their shareholders every year
Preparation of financial statement
• Generally accepted accounting principles (GAAP)
Provide a common set of rules and a standards

• Auditor
A neutral third party that checks a firm’s financial
statement
Types of financial statement
• Balance sheet
• Income statement
• Statement of cash flow
Balance sheet
The balance sheet provides a snapshot of the
company’s assets, liabilities, and owners’ equity at
a specific point in time.

It is broken into three parts to include a company’s


assets, liabilities, and stockholder’s equity
Assets= liabilities + stockholder’s equity
Income statement
• The income statement provides information on the
company’s revenues and expenses over a specific
time period (usually annually or quarterly).

•  It also shows whether a company is making profit


or loss for a given period.
Statement of cash flow
•A cash flow statement is a financial
statement that provides aggregate data regarding
all cash inflows a company receives from its
ongoing operations and external investment
sources. It also includes all cash outflows that pay
for business activities and investments during a
given period.
Methods of financial statement
analysis
• Comparative financial statement
• Trend analysis
• Ratio analysis
• Fund flow analysis
• Cash flow analysis
• Cost-volume profit analysis
•Comparative financial statement
In this method, we prepare the income statement and balance
sheet in a way to get a time perspective of the line items.

•Trend analysis

In this method also, we compare and review the financial


statements for three or more years. Under trend analysis, the
earliest year becomes the base year.
•Ratio analysis

Ratio analysis is the most popular methods of financial statement


analysis. There are different types of ratios that help management
and analysts to dig out meaningful information. Ex- current ratio ,
debt equity ratio.

•Fund flow analysis

This method also helps to study the sources and uses of the funds
for a given period. It tells wherefrom the business is getting the
funds and where it is spending them.
•Cash flow analysis

This method helps to study the inflow and outflow of


cash and bank balances. Under the cash flow
anlysis method, we examine the movement of cash rather
than changes in the working capital.

•Cost volume profit analysis

 this method helps to define the relationship between


sales and variable costs, and the fixed cost. Such a
technique helps a business to find a break-even point,
margin of safety, etc.
Thank you

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