conclusion of compartive income statement and balance sheet
Answers
Every business needs to prepare basic financial statements that summarize its operating results and financial position for a particular period. These statements primarily include income statements, balance sheets, and cash flow statements.
Thus, the purpose of preparing these statements is to ascertain the profitability and financial soundness of a business. But the detailed information reflected in such statements alone is not sufficient to reach meaningful managerial conclusions. Therefore, detailed financial analysis and interpretation of these statements is required using various tools and techniques.
This analysis helps to understand the relationship between various components showcased in each of these statements. So, one of the tools commonly used to undertake financial statement analysis is creating comparative financial statements. Other techniques include:
Common Size Statement Analysis
Ratio Analysis
Cash Flow Analysis
Trend Analysis
This article talks about Comparative Financial Statements Analysis. Hence, let’s understand:
what are comparative financial statements,
how such statements are prepared and
why are these comparative statements important.