Meaning of Analysis of Financial Statements:
Importance of Analysis of Financial Statements are:
Creditors Viewpoint: Creditors supplying goods to a business are interested to know as to whether the business would be in a position to pay the amount on due date. They are more interested in current assets and current liabilities of the business. If current assets are sufficient, say, twice the current liabilities, they are satisfied that the business would be able to discharge the short-term debts on time.
Management Viewpoint: Analysis of Financial Statements enables the management to evaluate teh overall efficiency of the firm. The analysis and interpretation of Financial Statements provide adequate information for planning and controlling the affairs of the business. Future forecasts can easily be made by analysing the past data with the help of this information.
