Question

The sources outside of the annual report that can contribute to the analysis of financial statements. List five of them.

Answer 1

1. Comparative Financial statements: In comparative financial analysis financial data is analysied over a period of time for the same organisation. or for the same period with the different organisation.

2. Ratio analysis: A statement showing different types of ratios are prepared to check the different elements in the financial statements. Like Liquidity ratio is calculated to check the liquid position of the company.

3. Fund Flow statement: Fund flow statement shows the flow of fund over a period of time.

4. Common size statement Analysis: It means analyisng the data for a period in terms of percenatge. It provides a clear picture as to the growth over a period of time.

5. Cost Volume profit analysis: It helps in understanding of how changes n cost affects the profitability of the company.