Question

Explain the techniques of financial statements analysis.

17 Feb 2026
Answer :
Word Count : 931
Financial statement analysis refers to the process of examining and interpreting the information contained in financial statements to assess the financial performance and position of a business enterprise. In Accountancy and Financial Management, it plays a vital role in decision-making for investors, creditors, management, and other stakeholders. Various techniques are used to analyze financial statements effectively, each providing different insights into profitability, liquidity, solvency, and operational efficiency. One of the most important techniques is comparative financial statement analysis. In this method, financial statements of different accounting periods are placed side by side to identify changes in figures over time. For example, comparative income statements reveal changes in revenue, expenses, and net profit across years, while comparative balance sheets show variations in assets, liabilities, and shareholders’ equity. By calculating the increase or decrease in absolute terms and in percentage terms, analysts can determine growth trends, performance improvement, or signs of financial distress. This technique helps management _________ _____ __________ ____ _________.
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