Financial Statement Analysis
Definition and Explanation of Financial Statement Analysis: Financial statement analysisis defined as the process of identifying financial strengths and weaknesses of the firm by properly establishingrelationshipbetween the items of thebalance sheetand the profit and loss account. There are various methods or techniques that are used in analyzingfinancial statements, such as comparative statements, schedule of changes […]
FINANCIAL RATIOS AND THEIR INTERPRETATION Different Financial Ratios
OBJECTIVES The importance of ratio analysis lies in the fact that it presents data on a comparative basis and enables the drawing of inferences regarding the performance of the firm. Ratio analysis helps in concluding the following aspects: Liquidity Position: Ratio analysis helps in determining the liquidity position of the firm. A firm can be said to
(a) Revenue – Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major operations. (b) Expenses – Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or
Income statement, also called profit and loss statement (P&L) and Statement of Operations is financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time – usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs. The purpose
Current Liabilities Current liabilities are short-term financial obligations that are paid off within one year or one current operating cycle. These liabilities are reasonably expected to be liquidated within a year. It includes: · Accrued expenses as wages, taxes, and interest payments not yet paid · Accounts payable · Short-term notes · Cash dividends and · Revenues
Liability A liability is a debt assumed by a business entity as a result of its borrowing activities or other fiscal obligations (such as funding pension plans for its employees). Liabilities are debts and obligations of the business they represent creditors claim on business assets.
Loans and Advances include · House building advance · Car, scooter, computer etc. advance · Multi purpose advance · Transfer travelling allowance advance · Tour travelling allowance advance · DRS payment.
Investments • Shares And Securities , such as bonds, common stock, or long-term notes • Associate Companies • Fixed deposits with banks/finance companies • Investments in special funds (e.g., sinking funds or pension funds). • Investments in fixed assets not used in operations (e.g., land held for sale). Remark: While fixed deposits with banks are
Capital Work in Progress Work that has not been completed but has already incurred a capital investment from the company. This is usually recorded as an asset on the balance sheet. Work in progress indicates any good that is not considered to be a final product, but must still be accounted for because funds have been invested toward
