Methods Or Techniques Of Financial Statement Analysis

Financial statement analysis can be performed by employing a number of methods or techniques. The following are the important methods or techniques of financial statement analysis.

1. Ratio Analysis
Ratio analysis is the analysis of the interrelationship between two financial figures.

2. Cash Flow Analysis
Cash flow analysis is the analysis of the change in the cash position during a period.

3. Comparative Financial Statements
Comparative financial statement is a analysis of financial statements of the company for two years or of the two companies of similar types.

4. Trend Analysis
Trend analysis is the analysis of the trend of the financial ratios of the company over the years.

The methods to be selected for the analysis depend upon the circumstances and the users' need. The user or the analyst should use appropriate methods to derive required information to fulfil their needs.