Finance

INTRODUCTION:

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity.

Relevant financial information is presented in a structured manner and in a form easy to understand. They typically include basic financial statements, accompanied by a management discussion and analysis. The three basic financial statements are the:

(1) A balance sheet, also referred to as a statement of financial position, reports on a company's assets, liabilities, and ownership equity at a given point in time.

(2) An income statement, also known as a statement of comprehensive income, statement of revenue & expense, P&L or profit and loss report, reports on a company's income, expenses, and profits over a period of time. A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period.

(3) A statement of cash flows reports on a company's cash flow activities, particularly its operating, investing and financing activities.

Financial statement analysis is an integral and important part of the broader field of business analysis. Business analysis is the process of evaluating company's economic prospects and risks. This includes an analyzing a company's business environment, its strategies, and its financial position and performance. Business analysis is useful in a wide range of business decisions such as whether to invest in equity or in debt securities, whether to extend credit through short or long term loans, how to value a business in an initial public offering (IPO), and how to evaluate restructurings including mergers, acquisitions, and divestitures.

Financial Statement Analysis is the application of analytical tools and techniques to general purpose financial statements related data to derive estimates and inferences useful in business analysis.

Financial Statement Analysis reduces reliance on...