1. Financial Statement Analysis
Overview

2. Financial Analysis
It is the use of financial statements to analyze a company’s financial position and performance and to assess future financial performance.

3. Financial Analysis consists of three broad areas.
Profitability analysis
Risk analysis
Analysis of sources and uses of funds.

4. Profitability Analysis-evaluation of company’s return on investment.
Risk analysis-evaluation of a company’s ability to meet its commitments.
Analysis of sources and uses of fund-evaluation of how a company is obtaining and deploying its funds.

5. Financial statements and related disclosures inform us about four major activities of the company:-
Planning
Financing
Investing
Operating

6. Financial statements reflect business activities
Balance sheet
Income statement
Statement of shareholders' equity
Statement of cash flows

7. Links between financial statements
Financial statements are linked by design.
Every transaction captured in the three statements-cash flow statement, income statement and statement of shareholders’ equity-impacts the balance sheet.

8. Analysis tools Comparative financial statement Analysis
Common-size financial statement analysis
Ratio Analysis
Cash flow analysis