Transcription of Analysis of Financial Statements 4 - NCERT
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Analysis of Financial Statements 4 - NCERT
You have learnt about the Financial Statements (Income Statement and Balance Sheet) ofcompanies. Basically, these are summarisedfinancial reports which provide the operating resultsand Financial position of companies, and the detailedinformation contained therein is useful for assessingthe operational efficiency and Financial soundnessof a company. This requires proper Analysis andinterpretation of such information for which anumber of techniques (tools) have been developedby Financial experts. In this chapter we will have anoverview of these Meaning of Analysis of Financial StatementsThe process of critical evaluation of the financialinformation contained in the Financial Statements inorder to understand and make decisions regardingthe operations of the firm is called FinancialStatement Analysis .
By looking at a trend in a particular ratio, one may find whether the ratio is falling, rising or remaining relatively constant. From this observation, a problem is detected or the sign of good or poor management is detected. 4. Ratio Analysis: It …
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