FINANCIAL STATEMENT

ANALYSIS AND
INTERPRETATION
 SIGNIFICANCE FINANCIAL
STATEMENT ANALYSIS

Financial Statement Analysis provide useful

information on the business economic standing
and profit levels.

These statements analysis are useful to investors,

company’s top management, creditors and those
who are interested to review operating data and
evaluate periodic business performance.

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 FINANCIAL STATEMENT ANALYSIS

It is an important part of the overall financial

assessment and evaluation. The various users and
business stakeholders look at the different concern
from their respective view point and are interested in
knowing about its profitability, financial condition,
financial capability, and financial structure.

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 FINANCIAL STATEMENT ANALYSIS IS
SIGNIFICANT SINCE IT:
1. Determines the earning capacity or profitability of the
business concern.

2. Shows the Short Term and Long Term Solvency of the Business
Concern

3. Assists in making comparative studies between various firms.

4. Useful in preparing budgets and financial forecasts

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 HORIZONTAL
ANALYSIS
(ALSO KNOWN AS TREND
A N A LY S I S )

It is facilitated by showing
the changes between years
in both peso and
percentage form

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 THE FORMULA:
HORIZONTAL a.) The formula used to determine the Change in
Amount: NEW YEAR
ANALYSIS LESS: OLD YEAR
CHANGE IN AMOUNT
b.) To determine the percentage of change:
CHANGE IN AMOUNT
X 100
OLD YEAR

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 1.) NEW YEAR
LESS: OLD YEAR
CHANGE IN AMOUNT

2.) CHANGE IN AMOUNT

OLD YEAR
1.) Current Assets

2008 550,000
2007 (533,000)
17,000

2.) Percentage of Change:

17,000 x 100
533,000

= 3.18
= 3.2%

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TITLE EXAMPLE:

1.) NEW YEAR

LESS: OLD YEAR
CHANGE IN AMOUNT

2.) CHANGE IN AMOUNT

OLD YEAR
1.) Current Assets

2008 1, 498, 000

2007 (1, 200, 000)
298, 000

2.) Percentage of Change:

298,000 x 100
1,200,000
=24.8%

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VERTICAL It is the procedure of preparing and
presenting common size statements.
ANALYSIS Common Size Statement is one that
shows the items appearing on it
percentage form as well as in peso
form.

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FORMULA:

EACH ASSET ITEM x 100

TOTAL ASSETS

EACH LIABILITY ITEMx100

TOTAL LIABILITIES &
STOCKHOLDERS’ EQUITY

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 THANK YOU

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