Explain about financial analysis, Strategic Management

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Q. Explain about Financial analysis?

The objective of financial statements is to provide information to all users of accounts to help them for decision-making.  Note that most users will only have access to published financial statements.

The use of ratios

  • To compare results over a period of time
  • To measure performance against other organisations
  • To compare results with a target
  • To compare against industry averages

Ratios can be grouped into 3 main areas

  • Performance - how well the business has done (profitability)
  • Position - short term standing of the business (liquidity)
  • Potential - what the future holds for the business

 


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