TYPES OF FINANCIAL ANALYSIS

a) According to the material used, the analysis can be –
 i) External analysis :
Where analysis is done by external interested parties and
 ii) Internal analysis :
Where analysis is done by internal parties
b) According to the modus operandi of the analysis, the analysis can be –
 i)Horizontal analysis : Where each single item in the statement is analysed over a no of years, so that its trend is known and
ii) Vertical analysis : Where various items in a specific year’s statement are analysed so that inter relationships are understood.

ANALYSIS OF FINANCIAL STATEMENTS

LEARNING OBJECTIVES
After going through this chapter, the reader is expected to –
1. Understand what is meant by Financial Statement Analysis
2. Identify the objectives of Financial Statement Analysis
3. Understand the various types of financial analysis
4. Understand and analyse the various tools and techniques of Financial Statement Analysis
5. Understand how to prepare and interpret Comparative and Common size Financial Statements and Trend analysis
6. Understand the concept of Ratio anlaysis, its respective merits, demerits and the various classifications of ratios etc
7. Understand the concept of Funds Flow Analysis – its merits, demerits, meaning of the work fund, movement of funds, etc and also preparation of Funds Flow Analysis
8. Understand the concept of Cash Flow Analysis – its merits, demerits, distinction between Cash Flow and Funds Flow concepts, Preparation of Cash Flow Analysis etc