Review Of Literature On Financial Statement Analysis

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Accordingly, we want to examine both quantitative and qualitative data in order to ascertain the quality of earnings and the quality and protection of assets.

In periods of recession when business failures are common, the balance sheet takes on increase importance because the question of liquidity is uppermost in the minds of many in the business community.

It describes certain attributes of a company that is considered to fairly represent its financial activities. According to Meigs and Meigs (2003), the purpose of financial statement analysis is to provide information about a business unit for decision making purpose and such information need not to be limited to accounting data.

Meigs and Meigs (2003) stated that the rate of return on investment (ROI) is a test of management’s efficiency in using available resources. White ratios and other relationships based on past performance may be helpful in predicting the future earnings performance and financial health of a company, we must be aware of the inherent limitations of such data.

Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures.

These statement are also used as part of management’s annual report to the stockholders.Finally, income tax is paid from earning before tax resulting in net profit.Management decides if they want to pay dividends or not.Operating income is calculated by subtracting the depreciation and the other selling and administrative expenses.From the operating income, interest and/or amortization is paid which will result in earning before tax income of the entity.However, when business conditions are good, the income statement receives more attention.Nevertheless, a financial analyst has to grapple on the above complexities of using financial statement analysis to achieve a specific purpose. Uses and Users of Financial Statement According to Akpan (2002), financial statement may be used by users for different purposes: a) OWNERS AND MANAGERS: Require financial statement to make important business decisions that affect its operations.Matlab control system toolbox was then used to analyze the system model ..... This particular project covers the modelling of the robot, CHAPTER#2 Literature review The Literature review of this study will emphasis on the related studies on comparing and analyzing financial statements to make an investment. Objective of financial statement analysis Uses and users of financial statement analysis Classification of financial statement Relationship among the Statement of Financial Position, Income Statement, Statement of Cash Flows and Statement of Retained Earnings.The basis of financial planning analysis and decision making is the financial information (Statements). Techniques of financial statement analysis Limitations of financial statement analysis Impact of inflation on financial statement analysis I. According to Meigs and Meigs (2003), financial statement are a structured representation of the financial position and financial performance of an entity.Financial statements are needed to predict, compare and evaluate a firm’s earning ability. The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions.It is also required to aid in economic decision making investment and financing decision making. Financial statements also show the results of the management’s stewardship of the resources entrusted to it.

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