What is the purpose of financial statement analysis? What are some of the tools that we can use to analyze financial performance? What should we use to benchmark our performance? Why?
1. The purpose of a financial statement is to enable a business to establish the result of its operations over a period of time and to determine its worth at a specific date. Financial statements are often prepared by business people to assist them in evaluating their financial condition.
2. Ratio analysis is a tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to pre