How to do financial statement analysis?

1
How to do financial statement analysis?
2
The detailed information about the money invested
and earned by a business can only be obtained
through financial statements. In this article, we
have covered the inferences for getting
a financial statement analysis for the smooth
conduct of a business.
What Are Financial Statements?

• Financial statements are written records that
  depict the overall financial performance of a
  business entity. This statement is utilized by
  professionals from governmental agencies,
  investors or market analysts to determine the
  financial capability of a company. Moreover, one
  can also perform an analysis of the overall
  profits of a company through these statements.
• A financial statement consists of these three
  types of statements
• Balance Sheet
• Profit and Loss statement
• Cash flow statement
• Apart from this,  financial statement is used by
  government and tax agencies for
• auditing and to perform checks related to tax and
  other financial purposes.

3
Reasons To Get Financial Statements Analysis

• Getting the financial statement analysis from a
  reputed firm can help your company prosper.
• A financial statement can help you to identify
  the weak points and strengths of your firm. Thus
  in return,
• you can work on them to ensure that your business
  runs smoothly. Here are a few more benefits of
• getting a financial statement analysis
•  
• Determine your firm's capacity to pay back debts.
• Determine your company's potential sources of
  income and profit margins
• Review the financial ratios of your business to
  find out the financial condition of a company
• Keep a check on the business transactions of your
  company through financial statements
• Manage your working capital cycle (inventory
  days, debtor days, creditor days)  
• As a finance expert, one needs to have detailed
  knowledge about three main areas before
  undertaking 
• financial statement analysis.
• The layout of a financial statement
• Economic features of the industry in which the
  business functions
• Accounting policies followed by the company

4
How To Perform Financial Statement Analysis

• Identifying the industry economic attributes -
  The first step is to evaluate the industry's
  value chain in
• which the business is operating. These activities
  mainly include essential steps such as the
  production
• and distribution of the outcomes/services offered
  by the company. The method of porter's five
  forces
• is very effective for evaluating the competition
  in an industry.
• Recognising the techniques used by the business -
  The second step is to discern the types of
  products/
• services that the firm has to offer. It includes
  various aspects such as the distinct qualities of
  the outcome,
• profitability, marketing strategies that have
  been implemented, including cost-effectiveness.
  On top of
• that, one can also note the other factors such as
  industry diversification, geographical factors
  etc.
• Evaluating the quality of the financial
  statements - The financial statement
  analysis must be done keeping
• in mind the current accounting standards. When it
  comes to analysing a balance sheet, one must keep
  it
• in mind if the statement depicts the company's
  overall financial position. On the other hand, an
  income
• statement must depict the sources of income of a
  firm accurately. Lastly, assessing a cash flow
  statement
• must help understand the investments and
  financial activities undertaken by a business.

5
Wrapping up
The performance of a firm can be evaluated by its
financial statements. It must be well framed
according to the current business needs.
Therefore, it is vital to trust professionals
when it comes to getting your  financial
statement analysis. Make Resurgent India your
most preferred choice for keeping the finances of
your business on track. To gain more insights
about the leading investment bank of India, visit
the website.
Original Source Financial Statement Analysis