Financial Statement Analysis Report: Ratio Analysis and Performance

This report provides a financial statement analysis utilizing ratio analysis to evaluate a company's financial health and performance. It examines key financial ratios, including profitability, liquidity, and leverage ratios, to assess operational efficiency and the company's overall market position. The analysis includes an assessment of the company's strong profitability and liquidity, highlighting its ability to meet short-term obligations and manage inventory effectively. The report also discusses the benefits and limitations of ratio analysis in decision-making, emphasizing the importance of understanding financial trends and the challenges of comparing companies across different industries. References to relevant academic sources are also provided.

ANALYSIS OF THE
FINANCIAL
STATEMENT

RATIO ANALYSIS
 Ratio analysis is tool used by organizations for
assessing the financial health and performance of
company.
 It aids financial analysts and experts in making the
financial decision about the company.
 These ratios guide them about the performance of
company and whether the investments should be
made or not.
 The financial ratios for the year 2018 and 2019
shows are calculated for analyzing the trend of
company.

FINANCIAL ANALYSIS
 Profitability status of company is very strong. Company is having returns over the sales
revenues. This shows the operational efficiency of he company in managing the overall
process undergoing within the organization.
 Liquidity ratio represent a strong position of company. Company is having enough
assets for meeting its short term obligations.
 Operational Efficiency can be judged by its high inventory turnover ratio. High
turnover shows that the stocks are moving fast.
 Leverage ratios shows the debt of company against its equity. The debt equity ratio of
company is not high and showing declining trend.

Overall performance
 Company is having sound position in the market. It is
earning required profits from the business.
 Its operational performance is improving from the last
year. It is having strong liquidity position but is required
to invest funds in short term investments. Leverage ratio
is adequate as per the industry standards.
 Performance of the company has improved from last
year and this has helped in strengthening the position at
the same time

Understanding of Ratios and fluctuations
 Understanding of ratios is essential to understand
the trend of financial figures.
 Fluctuations could not be understood properly
without having the adequate understanding about
the ratios.
 It is essential to find the corrective steps for the
weaknesses.

Benefits and Limitations of the Ratio analysis
in decision making
 Benefits
 It is useful in the analysis of financial position.
 Useful in simplification of accounting figures
 Useful in assessing Operational Efficiency

Limitations
 Comparison is difficult for organization of
separate industries.
 Do not consider time value of money.

REFERENCES
 Campbell, J.L., and et.al., 2019. Do Investors Adjust Financial Statement Ratios when
Financial Statements Fail to Reflect Economic Substance? Evidence from Cash Flow
Hedges. Evidence from Cash Flow Hedges (April 2019).
 Easton, M. and Sommers, Z., 2018. Financial Statement Analysis & Valuation, 5e.
 Aman, S.M., 2016. Analysis of financial statements using ratio analysis for the last 5
years.
 Bragg, S.M., 2018. The Interpretation of Financial Statements. Accounting Tools,
Incorporated.