Page 1 - LN FSA

Class – xii

ACCOUNTANCY

LESSON NOTE - Financial Statement Analysis

Meaning of Financial Statement Analysis:

• Financial Statements analysis is a systematic process of studying

the relationship among the various financial factors contained in the

financial statements to have a better understanding of the working
and the Financial position of a business.

• in simple words analysis of financial statements is a more

comprehensive study of balance sheet and profit and loss account
using the tools of analysis to get a proper understanding of

profitability and financial position of business.

Objective of Finacial Statement Analysis :

• To measure the Profitability or Earning Capacity of the business

• To measure the Financial Strength of the business

• To make Comparative Study within the firm (intra – firm) and

with other firms (inter – firm)
• To judge the Efficiency of Management

• To provide Useful Information’s to the Management

• To find out the Capability for payment of interest, dividend etc
• To measure the Short-term and Long-term Solvency of the

business