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