The procedure of financial analysis is as follows:
1. Determine objective and limits of financial analysis : It is necessary to determine that why the financial analysists want to do the analysis? As if it is for study of business progress, only profit & loss account will be analysed. Thus, balance sheet will be analysed if it is to analysis financial condition, the method of analysis will be chosen according to the object and limits.
2. End to end study of financial statement: There will be an end to end study for the evaluation of the given information.
3. Collection of useful information : Financial analysist will collect other information related shown information in financial other statement for analysis.
4. Re-classification of information’s and imminent the figures: Figures are should be in round figures on the basis of immanency by re-collecting the informations.
5. Comparison: Impersonal data is extract less so there will be a comparative study the compare inter-firm to intra-firm.
6. Analysis: Comparative data should be used for an objective analysis.
7. Explanation and Presentation : Explanation is not possible without analysis, analysis is useless without explanation.
Thus, financial analysis accounting’s last product is explanation and presentation. Business transaction’s records, classification and summation is extract less without it.
