What is financial analysis discuss various types of ratios and their utility in interpreting the financial information?
Answers
Financial analysis is the process of evaluating businesses, projects, budgets and other finance-related entities to determine their performance and suitability. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid or profitable enough to warrant a monetary investment. When looking at a specific company, a financial analyst conducts analysis by focusing on the income statement, balance sheet, and cash flow statement.
Financial analysis helps organization to evaluate profitability and creditability of the company.
MEANING OF FINANCIAL ANALYSIS
Financial analysis is the process of evaluating business, budget and projects. Performance and sustainability can be availed by the financial entities.
TYPES OF RATIOS
1. Liquid Ratio
2. Current Ratio
3. Net working capital ratio
4. Cash flow operation ratio
5. Debt equity ratio
6. Debt to asset ratio
7. Proprietary ratio
8. Fixed asset ratio
9. Interest coverage ratio
IMPORTANCE OF RATIO
- To evaluate creditability and profitability
- To compare past and present data