Types of Financial statement Analysis.pptx

Financial statement analysis is the process of reviewing and analyzing a company's financial statements to make better economic decisions to earn income in the future. These statements include the income statement, balance sheet, statement of cash flows, notes to accounts, and a statement of changes in equity.
The financial analysis examines and interprets data of various types according to their suitability. The most common types of financial analysis are vertical analysis, horizontal analysis, leverage analysis, growth rates, profitability analysis, liquidity analysis, efficiency analysis, cash flow, rates of return, valuation analysis, scenario and sensitivity analysis, and variance analysis.

1. Types of Financial statement Analysis Prepared and Presented by: Mohammad Rahmatullah Student ID: 182006031

2. Area Covered What is Financial statement Analysis Types of Financial statement analysis Horizontal and Vertical analysis Ratio analysis Internal and External analysis

3. Financial statement analysis Financial statement analysis  is the process of reviewing and analyzing a company’s Financial statement  to make better economic decisions to earn income in future. Financial statements analysis  are classified according to their objectives, Materials used and Modus operandi. The common types of financial statement analysis are Internal & External analysis, Short term & Long term analysis, Ratio analysis and Horizontal & Vertical analysis.

4. Horizontal and vertical analysis Horizontal analysis  also known as trend analysis. Horizontal Analysis compares Financial information over time, typically from past quarter or years.

5. Vertical analysis is the proportional analysis of a financial statement Every line item on an income statement is stated as a percentage of gross sales.

6. Ratio analysis Financial ratios compare the results in different line items of the financial statements. Basically, Ratio analysis means the difference between two variables. Performance ratios: These ratios are derived from the revenue and aggregate expenses line items on the income statement, and measure the ability of a business to generate a profit. It is measured by-  gross profit ratio and net profit ratio Liquidity ratios: These ratios compare the line items in the balance sheet, and measure the ability of a business to pay its bills in a timely manner. It is measured by- current ratio and quick ratio.

7. Leverage and coverage ratios: These ratios are used to estimate the comparative amounts of debt, equity, and assets of a business, as well as its ability to pay off its debts. It is measured by- debt to equity ratio Activity ratios: These ratios are used to calculate the speed with which assets and liabilities turnover, by comparing certain balance sheet and income statement line items. It is measured by- inventory turnover, and payables turnover. Financial ratio analysis is only possible when a company constructs its financial statements in a consistent manner.

8. Internal and External analysis Intercanal Financial analysis in generally referred to as managerial financial analysis. It is used to take a proper financial decision. Internal users of financial statement analysis are managers and owners. External financial analysis referred to overall financial heath of a company. Users of external financial statement are owners and prospective owners, Creditors and lenders, Employees and their unions, Customers, Governmental units, General public.

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