Financial Statement Analysis

Financial-Statement-Analysis

One of the most important steps in business decision making is the financial statement analysis. This process involves reviewing financial statements with the help of analytical or financial tools. It is a technique used by investors and creditors to analyse financial statements, it helps them in realizing which business is beneficial enough for investments and loans. Reviewing financial reports to attain an understanding of the organization’s financial situation through facts and figures. Financial statement analysis involves identification of following items:

Trends:

In order to analyse a company’s performance trend lines are created for key items in the financial statement. Typically trend lines are created for key items like; revenue, the gross margin, net profits, cash, accounts receivable, and debt.

Proportion analysis:

To compare and analyse the relationship between size of various accounts in any financial statement an array of ratios is available for discriminating among them. Proportion analyses helps in examining the revenues and expenses listed on the income statement and the assets, liabilities, and equity accounts listed on the balance sheet.

Profits plus aims to provide financial statement analysis in order to help you understand the financial circumstances of your business better, hence we believe that financial statement analysis is one of the most powerful tools to keep a check on your business’s financial situation. Although it can also be used to unveil trends in financial.

To ensure that your organization is following correct accounting procedures Profits Plus accountants follow the steps below to provide financial statement analysis report:

  • Variance analysis beneficial for examining income statement, balance sheet items and cash flow statement to recognise all exceptional or unwanted items.
  • Percentage highlights in order to observe large changes from one year to next year in order to investigate the reason for such higher percentage.
  • Calculation of liquidity, efficiency and profitability ratios and analyse the ratios with the best practice that the companies are using in related industry.