14

Analysis of Financial Statements

CHAPTER OBJECTIVES

This chapter will help the readers to:

  • Understand the nature and limitations of financial analysis.
  • Differentiate between inter-period and inter-firm comparison.
  • Prepare and analyse common size financial statements and indexed financial statements.
  • Compute and interpret various financial ratios.
  • Understand applications of ratio analysis using DuPont analysis and Z score.
  • Carry out detailed analysis of financial statements of companies.
14.1 INTRODUCTION

The focus of the book so far, has been on understanding the accounting process and contents of the financial statements—the balance sheet, the profit and loss statement, and the cash flow statement. This chapter will focus on the ...

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