What are the needs for financial statement analysis, Financial Management

Assignment Help:

Q. What are the needs for financial statement analysis?

The financial statements are to be studies for the following purposes.

a) To make comparisons between two sets of financial statements-

Management as well as other stakeholders, like potential investors in the share of your company would like to compare the performance of your company with the performance of another similar company or with the performance of past year. Management requires such comparison for improving itself, for finding the areas of weakness or strength.

b) To find out how funds or cash have come into and gone out of the organization-

Cash flows help you in deciding your future investments and financing decisions. They also indicate your weakness in cash management. For example, you may be inefficient In collecting money due from your customers in your hotel business.

c) To find out the liquidity position of firm-

As we have seen earlier, liquidity is very important indicator of financial health. Financial statement analysis helps you in finding out liquidity position of your firm.

d) To find out the solvency of the company-

Solvency means your company is able to pay its liabilities even in the long run. It indicates that your company may not be lead to financial distress. Finding out the degree of solvency is very important for you as well as for lenders to your firm and future investors in your firm.

e) To find out level of efficiency of the company in utilization of resources-

Management should know whether they are utilizing the resources like material, labour and of course, assets of the company in an efficient manner. It is possible that your competitor with only two aircrafts is doing more business per aircraft than you in spite of having ten aircrafts.


Related Discussions:- What are the needs for financial statement analysis

What is gross dividend, Gross dividend At the ending of the financial ...

Gross dividend At the ending of the financial year companies will announce the profits or losses that they have earned and a figure for net profit after tax. A company is able

Claim for refund, Claim for Refund - A refund isn't automatically mailed if...

Claim for Refund - A refund isn't automatically mailed if one is due. A taxpayer whether individual orbusiness, should file a request on a form. It should also be filed within the

Define a sunk cost, What is a sunk cost?  Is it relevant while evaluating a...

What is a sunk cost?  Is it relevant while evaluating a proposed capital budgeting project?  Explain. A sunk cost is a cash flow which has previously occurred, or that will take

Fin 2110, 1. Which of the following statements concerning the cash flow pro...

1. Which of the following statements concerning the cash flow production cycle is true? a) The profits reported in a given time period equal the cash flows generated. b) A company’

Demerits of profitability index method, Q. Demerits of profitability index ...

Q. Demerits of profitability index method? Demerits of PI method:- (i) This method is complicated to understand and implement (ii) Calculations in this method are complex

Irr, #question how to collect real irr %..

#question how to collect real irr %..

Concept of yield spreads, The Central Bank is an authority responsible for ...

The Central Bank is an authority responsible for monetary policy of its country. It regulates money supply and credit, issues currency, and manages exchange rate.

Currency denomination, The payment that the issuer makes to the bondh...

The payment that the issuer makes to the bondholder can be in any currency. The contract at the time of bond issue between the issuer and the investor can specify

What is deferred incomes, Q. What is Deferred Incomes? Deferred incomes...

Q. What is Deferred Incomes? Deferred incomes are incomes received in advance before supplying goods or services. They represent funds received by a firm for which it has to su

Calculate the rate of return, A Life Insurance Company invested $10,000,000...

A Life Insurance Company invested $10,000,000 in pure-discount U.S. bonds in May 1995 while the exchange rate was 80 yen per dollar. The insurance company liquidated the investment

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd