Showing posts from April, 2014

Trend Analysis : an important tool of Analysis and interpretation of financial statements

TREND ANALYSIS Trend Analysis is also an important tool of Analysis and interpretation of financial statements. Trend means tendency in general term. The Comparative financial statements study changes which have occurred in each item of the balance sheet and profit and loss account within a period of two years but do not indicate the trend of progress during past years. Trend analysis discloses changes in the financial and operating data of financial statements between specific periods in relation to any past year called the base year and makes possible for the analyst to form an opinion about the favorable or unfavorable tendencies as reflected by the accounting data. This method of Analysis is immensely helpful in making Comparative Study of Financial Statements for several years.
The trend analysis of business operations and other financial data may be done in any of the following ways:- Trend Percentage Trend Ratios Graphic or Diagrammatic presentation


TYPES OF FINANCIAL STATEMENT ANALYSIS It is depend upon the user for which purpose they have used financial statement. User used financial statement according to their purpose from different angles. Generally various type of financial statement are classify into three (03) group depending upon The nature of the analyst and material used by him.The objective of analysis.The modus operandi of analysis.
According to the analyst and material used by him: - There are two types of analysis. External analysisInternal analysis External analysis:-External Analysis is comprises of those people who are not directly related or concern with the business. For examples include creditor, investor, government agency, etc. 
Internal analysis: - Internal Analysis is comprises of those people who are directly related or concern with the business and have the right to assess the book of accounts.  For examples Chairman Cum Managing, directors,  trustee, etc.
On the basis of objective of analysis:- There are two…


Meaning The analysis of financial statement is a process of evaluating the relationship between component parts of financial statement to obtain a better understanding of firm financial position. Analysis is a process of critically examining the accounting information given in financial statements. For the purpose of analysis, individual items are studied; their interrelationship with other related figures is established. Thus analysis of financial statement refer to treatment of information contain in financial statement in a way so as to afford a full diagnosis of the profitably and financial position of the firm concern. Definitions According to Myser “Financial study analysis is largely a study of relationship among the various financial factor in the business as disclosed by the single set of statement and a study of trend of these factor shown in the financial statement”.
OBJECTIVE OF FINANCIAL STATEMENT ANALYSIS Financial statement is helpful in assessing the financial position and pr…