financial statement analysis


financial statement analysis
An analysis of the financial statements of a business to assess its performance and position. Ratios are normally calculated from the financial statements to assess the profitability, solvency, working capital management, liquidity, and capital structure of an organization. They may also be calculated over a period to enable an analysis of trends to be formulated or compared to other similar companies or industry averages. In conducting the analysis, regard will need to be paid to the accounting policies of the company and the extent to which any creative accounting may have taken place.

Accounting dictionary. 2014.

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