Masters of Business Administration

MBA
1. Financial Statement Analysis: Meaning
2. Financial Statement Analysis: Objectives
3. Types of Financial Statement Analysis
4. Techniques of Analysis and Interpretation
5. Comparative Financial Statements
6. Common Measurement Statements

CO5: Analyze the financial position of business

setups using performance measuring tools.

Previous Lecture:
Standard Costing
 Financial Statement Analysis: Meaning

Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions.

These statements include:

• The income statement,
• The balance sheet,
• The statement of cash flows, and
• The statement of changes in equity.

Financial statement analysis is a method or process involving specific techniques

for evaluating risks, performance, financial health, and future prospects of an
organization.
 OBJECTIVES

1. Examine the earning capacity and efficiency

2. Measure the managerial efficiency.
3. Estimate the performance evaluation
4. Measure short term and long term solvency position
5. Examine the source of finance and way of utilizing the available finance.
6. Determine earning capacity and future prospects
7. Identify the way of utilizing fixed assets
8. Investigate the future potential
9. Compare operational efficiency of similar concerns engaged in the same
industry.
10. Identify the growth trend
 TYPES OF FINANCIAL STATEMENT ANALYSIS

ACCORDING TO ACCORDING TO ACCORDING TO

NATURE OF ANALYST OBJECTIVES OF THE MODUS OPERANDI
AND MATERIAL USED ANALYSIS OF THE ANALYSIS

External Long-term Horizontal

Analysis Analysis Analysis

Internal Short-term Vertical

Analysis Analysis Analysis
Techniques of Analysis and Interpretation

Comparative Common
Financial Measurement Trend Analysis
Statements Statements

Net Working
Fund Flow Cash Flow
Capital
Statement Statement
Analysis

Ratio Analysis
 Comparative Financial
Statements

These are the statements showing the profitability and financial position of
a firm for different periods of time in a comparative form to give an idea
about the position of two or more periods. For this, we prepare,

1. Comparative Balance Sheet

2. Comparative Income Statement
 Common Measurement
Statements

These are the statements which indicate the relationship of different items of a
financial statement with a common item by expressing each item as a percentage
of that common item.

The percentage thus calculated can be easily compared with the results of
corresponding percentages of the previous year or of some other firms, as the
numbers are brought to common base. We prepare
1. Common size Balance Sheet
2. Common size Income Statement
 1. Financial Statement Analysis: Meaning
2. Financial Statement Analysis: Objectives
3. Types of Financial Statement Analysis
4. Techniques of Analysis and Interpretation
5. Comparative Financial Statements
6. Common Measurement Statements
Next Lecture:
Techniques of Financial Statements

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1:00 – 1:40 pm Monday

10/9/2020 CGCTC-Management, Jhanjheri 13