Meaning of Financial analysis
An analysis of financial statements is the process of critically examining in detail accounting information given in the financial statements. Meaning of Financial analysis - What is Financial Analysis? Meaning, Objectives, and Types. वित्तीय विश्लेषण क्या हैं? For the purpose of analysis, individual items are studied, their interrelationships with other related figures are established, the data is sometimes rearranged to have the better understanding of the information with the help of different techniques or tools for the purpose.
Analysing financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm's position and performance. The analysis of financial statements thus refers to the treatment of the information contained in the financial statements in a way so as to afford a full diagnosis of the profitability and financial position of the firm concerned.
For this purpose financial statements are classified methodically, analyzed and compared with the figures of previous years or other similar firms. The term 'Analysis' and 'interpretation' though are closely related, but the distinction can be made between the two. Analysis means evaluating the relationship between components of financial statements to understand the firm's performance in a better way.
Various account balances appear in the financial statements. These account balances do not represent homogeneous data so it is difficult to interpret them and draw some conclusions. This requires an analysis of the data in the financial statements so as to bring some homogeneity to the figures shown in the financial statements. Interpretation is thus drawing of inference and stating what the figures in the financial statements really mean. Interpretation is dependent on the interpreter himself. The interpreter must have experience, understanding, and intelligence to draw correct conclusions from the analyzed data.
Analysing financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm's position and performance. The analysis of financial statements thus refers to the treatment of the information contained in the financial statements in a way so as to afford a full diagnosis of the profitability and financial position of the firm concerned.
For this purpose financial statements are classified methodically, analyzed and compared with the figures of previous years or other similar firms. The term 'Analysis' and 'interpretation' though are closely related, but the distinction can be made between the two. Analysis means evaluating the relationship between components of financial statements to understand the firm's performance in a better way.
Various account balances appear in the financial statements. These account balances do not represent homogeneous data so it is difficult to interpret them and draw some conclusions. This requires an analysis of the data in the financial statements so as to bring some homogeneity to the figures shown in the financial statements. Interpretation is thus drawing of inference and stating what the figures in the financial statements really mean. Interpretation is dependent on the interpreter himself. The interpreter must have experience, understanding, and intelligence to draw correct conclusions from the analyzed data.
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