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Describe the uses of financial statements analysis. Or, Objectives Of Financial Statement Analysis

Posted by Ripon Abu Hasnat on Tuesday, February 2, 2016 | 0 comments

The uses/ objectives of financial statement analysis are as follows

1. Assessment of Past Performance: Financial statement analysis judging management's past performance and opportunities of future performance like operating expenses, net income, cash flows, return on investment, etc.

2. Assessment of current position: Financial statement analysis shows the current position of the assets liabilities.

3. Prediction of profitability and growth prospects: It helps in assessing and predicting the earning prospects and growth rates of earning and judging earning potential of business enterprise.

4. Prediction of bankruptcy and failure: It is an important tool in assessing and predicting bankruptcy and probability of business failure.

5. Assessment of the operational efficiency: It helps to assess the operational efficiency and deviation between standards and actual performance.