Classification of Ratios Accounting ratios are used to analyze the financial position of the firm. They are being categorized into two different types which are given as below: A) Traditional classification – The ratios of this type are based on the financial statements. Balance Sheet Ratios – When both figures are used to calculate a … Read more
Ratio Analysis is carried out on complex financial statements to convert them into simpler and summarised forms. As a matter of fact, the weakness in the original financial statements would also be reflected in the analysis derived from ratios. So, ratio analysis is prone to double limitations – Inherent limitation of financial statements, and Limitation … Read more
Ratio Analysis is one of the indispensable tools used to interpret the financial statements of a company. It yields such results which help in easy understanding of the company’s overall performance. If the process of computing ratios is carried out properly, it can highlight the areas where the performance of the company is lacking as … Read more
What is Ratio Analysis? Ratio Analysis – Ratios are a mathematical tool that helps in defining the relationship between two figures. The analysis and interpretation of financial statements are carried out with the help of Ratio Analysis. The primary objective of ratio analysis is to help in understanding the performance of a company. Ratios reflect … Read more
Limitations of Financial Analysis While financial analysis assists in deciding the Financial strengths and weaknesses of a company, its correctness depends on the quality and extent of information available in financial statements. The limitations of the financial statements result in Limitations of financial analysis. An analyst, who makes the analysis of financial statements must possess … Read more
Comparative Balance Sheet A comparative balance sheet presents side-by-side information about an entity’s assets, liabilities, and shareholder’s equity as of multiple points in time. It shows increases and decreases in the various assets, liabilities, and capital. A comparative balance sheet usually has two columns of amounts that appear to the right of the descriptions. The … Read more
Comparative Statement Examples A comparative statement is prepared in order to compare the figures of financial statements for two or more years. It gives an idea about the financial health of the organization. Every company which wants to estimate its future progress must refer to its past performance. When financial statements of one firm for … Read more
Tools of Analysis of Financial Statements Class 12 Notes and Solutions The analysis of financial statements can be conducted with the help of the following tools – Comparative Statements: As the name suggests, these statements help in comparing the data of two or more periods. It presents the figures of balance sheet and income statement … Read more
Objectives of Analysis of Financial Statements Class 12 Notes The financial statements are the summarised report of an enterprise that contains information related to the financial position of the company. The analysis of financial statements is very useful in deciding the financial strengths and weaknesses of a company. With the help of financial analysis, one … Read more
Significance of Analysis of Financial Statements Significance of analysis of financial statements : Financial analysis is the process of evaluating business, projects, budgets and other finance related transactions to determine their performance and suitability. It is generally used to analyze whether an entity is stable, solvent, liquid or profitable enough to warrant a monetary investment. … Read more