Learning Materials For Accounting, Management , Finance And Economics.

Friday, February 5, 2010

Methods Or Techniques Of Financial Statement Analysis

Financial statement analysis can be performed by employing a number of methods or techniques. The following are the important methods or techniques of financial statement analysis.

1. Ratio Analysis

Ratio analysis is the analysis of the interrelationship between two financial figures.

2. Cash Flow Analysis

Cash flow analysis is the analysis of the change in the cash position during a period.

3. Comparative Financial Statements

Comparative financial statement is a analysis of financial statements of the company for two years or of the two companies of similar types.

4. Trend Analysis

Trend analysis is the analysis of the trend of the financial ratios of the company over the years.

The methods to be selected for the analysis depend upon the circumstances and the users' need. The user or the analyst should use appropriate methods to derive required information to fulfill their needs.