What do you mean by Financial Analysis? PDF Print E-mail

Financial Analysis refers to the analysis of year to year financial data, usually Income Statement and Balance Sheet Data for the purposes of determining the elements that contributed to the profitability of the company and the efficiency with which the company used its assets or took advantage of its loans and shareholder funds. The analysis could also reveal various other things about the company including

  • sources and uses of funds

  • efficiency of collection methods for accounts receivable

  • the viability of the company given its asset versus liability status

  • the company's ability to meet short term loan repayment obligations

  • prospects for longer term growth

Analysis of other accounting information could reveal a host of other information that help companies formulate plans to curtail adverse situations and take advantage of favorable situations.

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