Get Commerce 4FK3: Financial Statement Analysis

There are five commonplace approaches to financial statement analysis: horizontal analysis, vertical analysis, ratio analysis, trend analysis and cost-volume profit analysis.

An example of Financial analysis is analyzing a company's performance and trend by calculating financial ratios like profitability ratios, including net profit ratio, which is calculated by net profit divided by sales.

The five step financial statement analysis plan – expanded. Liquidity, activity, leverage, operating performance and cash flow – use these steps when analyzing financial statements. Determine working capital, your current ratio and quick test ratio to assist in determining liquidity.

The income statement, balance sheet, and statement of cash flows are required financial statements. These three statements are informative tools that traders can use to analyze a company's financial strength and provide a quick picture of a company's financial health and underlying value.

What Is Financial Statement Analysis? Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. External stakeholders use it to understand the overall health of an organization and to evaluate financial performance and business value.

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.

Horizontal, vertical, and ratio analysis are three techniques that analysts use when analyzing financial statements.

But if you're looking for investors for your business, or want to apply for credit, you'll find that four types of financial statements—the balance sheet, the income statement, the cash flow statement, and the statement of owner's equity—can be crucial in helping you meet your financing goals.