Financial Statement

A financial statement is a quantitative way of showing

how a company is doing.
Meigs & Meigs(1998):- financial statement is a
logical point to begin the study of accounting.
Nwoha (1998):- financial statements as reliable
information about the economic resource and
obligations of a business enterprise.
Duru (2012):- financial statement is a statement
which conveys to management and to interested
outsiders a concise picture of the profitability and
financial position of a business.
 Objective of Financial Statements
The objective of financial statements is to
provide information about the financial
position, performance and changes in
financial position of an entity that is useful
to a wide range of users in making
economic decisions.
Sources of Financial Information
The major source of financial information is a firm's
annual report.
 Financial Statement Analysis
Financial statement analysis will help business owners
and other intersted people to analyse the data in
financial statements to provide them with better
information about such key factors for decision making
and ultimate business survival.
Financial Statement Analysis is the collective name for
the tools and techniques that are intended to provide
relevant information to the decision makers. The
purpose of the FSA is to assess the financial health and
performance of the company.
FSA consist of the comparisons for the same company
over the period of time and comparisions of different
companies either in the same industry or in different
industries.
 Employees

Shareholders Trade creditors

Government Management Customers

Loan providers Public

Potential
Investors
 Income Statement
provides results of business activities
Balance Sheet
states assets and claims against them
(liabilities and owners equity)
Statement of Cash Flows
provides prior cash flow information
helps analyst assess the firms ability to
pay interested parties
Statement of Shareholders Equity
 External analysis: The external analysis is done
on the basis of published financial statements
by those who do not have access to
the accounting information, such
as, stock holders, banks, creditors, and the
general public.
Internal Analysis: This type of analysis is done
by finance and accounting department. The
objective of such analysis is to provide
the information to the top management, while
assisting in the decision making process.
 Short term Analysis: It is concerned with the
working capital analysis. It involves the analysis of
both current assets and current liabilities, so that the
cash position (liquidity) may be determined.
Horizontal Analysis: The comparative
financial statements are an example of
horizontal analysis, as it involves analysis of
financial statements for a number of years.
Horizontal analysis is also regarded
as Dynamic Analysis.
 Vertical Analysis: it is performed when
financial ratios are to be calculated for one year
only. It is also called as static analysis.
 GAAP
AICPA
FASB
IFRS
IAS
 Companies doing business in more than one
nation found that it is hard to comply with
more than one set of accounting standards
established by authorities in different nations.

In response to this problem, International

Accounting Standards Committee (IASC) was
founded in 1973 to develop a single set of
global accounting standards.