Download Financial Statement Analysis and more Study notes Accounting in PDF only on Docsity! Financial Statement Analysis 1.1 Introduction A final important factor to consider when exploring the accounting context is Use and interpretation of financial statements. integral part of the analysis of Financial statements need to be fully aware of their weaknesses. some of them are It’s specific to the analytics tool you use, but most of the important ones are derived from it The content and characteristics of the original data that was created or published. Before you can perform an effective financial analysis, you should have a thorough understanding of the conventions and conventions of accounting discussed in the previous chapters. reached. In addition, accounting issues should be discussed in more detail. The more understood in Part 2, the more meaningful the interpretation should be. This chapter introduces the interpretation and its techniques. A deeper investigation is deferred to Part 3.Chapter 1 identified the uses of accounting information and its various needs. The following activities can provide useful revisions: Numbers alone are not very useful information. for example, “Last year's turnover he was NOK 20 million"; what information is this give? Without knowing the exchange rate between domestic currencies Norwegian Krone, comparison with house sales is not possible. Without knowing the size of the Norwegian market for the product in question, Knowing the size of this market and the structure of the number of competitors, it is not possible to compare it with the general situation in Norway. without Prior year sales and existing assets and The cost spent to create these sales, progress, effectiveness, or Efficiency is possible. Comparison is important. Relationships can be a very powerful tool, but It's very simple. A ratio is one number divided by another. for total The Norwegian market for this product is NOK 400 million, with a share of The above company has a total home market turnover of 20.400 (or1:20 or 5 percent). In many cases, probably due to habit and experience, percentages seem to be the most useful and easy to understand. A simple but effective application of this technique is the general size idea. This includes Reduction of annual accounting amounts to a percentage of the relevant total. Several years of results must be available for effective comparison in practice. In total, the number is preferably 5 or more. however, There is greater risk that the accounting policies used during the period will change. Such changes distort all trend considerations. They should be searched for and eliminated as subjectively as possible. A number of ratios are considered below. It should be emphasized that there is such a thing There are no absolute "rules" for defining ratios. Because the overall purpose of ratio analysis is useful, individual analysts should adjust the techniques used Maximize relevance to the specific situation encountered. Profit Ratios
