Question

What is meant by 'Analysis of Financial Statements'? State any two objectives of such an analysis.

Answer 1

A critical and thorough examination of the financial statements of a company in order to understand the data contained in it, is known as 'Analysis of Financial Statements'.

Objectives of Financial Analysis
(i) It enables the conduct of meaningful comparisons of financial data. It provides better and easy understanding of the changes in the financial data overtime.
(ii) It helps in designing effective plans and better execution of plans by enabling control and checks over the use of the financial resources.