Analysing financial statements in an assignment means endless calculations. There are various techniques of analysis that you need to use in order to understand the data that has been presented to you.
So, if you are not good at crunching numbers, then you might need accounting assignment help. When you subscribe to such a service, experts will guide you through the entire process of analysing financial statements and assessing the company data.
You could also take help from accounting experts from a reliable academic service, MyAssignmentHelp.com.
However, you need to learn the art and science of analysing financial statements, too. And that is exactly what this blog will help you with!
Effective Techniques for Analysing Financial Statements
There are a few different kinds of analysis that you can perform on the various kinds of financial statements. Go through them in detail to understand what you need to do when faced with each of them
Ratio Analysis –
In this kind of analysis, you need to compare similar things to each other and create ratios from the financial statement that has been given to you. The following are a few of the different kinds of ratios that you might come across.
| Liquidity Ratios | This measures how easily a company can pay its short-term debts. |
| Solvency Ratios | This is used to see whether the company can actually meet its long-term debts or not. |
| Profitability Ratios | This kind of ratio is used to check whether the company whose financial data you are checking is profitable or not. |
| Efficiency Ratios | This is used to see whether the company is using all is its assets very efficiently or not. |
Trend Analysis –
This is used to check whether there is any pattern in the company’s growth or not. In order to do this you will need to compare the financial data of the past few years and see if you can identify any trend over there. Are sales increasing along with profit? Or are expenses growing faster than revenue? Using this method of analysis, we can look at the bigger picture and see where the company stands in the future market.
Vertical Analysis –
Over here, percentages are used instead of ratios. For example, in the income statement, you will be checking the percentage of total revenue, and in a balance sheet, you will be checking the percentage of all the assets owned by the company. This helps us to make a comparison between two different time periods of the same company or make a comparison between two different companies over the same period of time.
Horizontal Analysis –
In this type of analysis, you are supposed to make a comparison between the various years that the company has been running. This is very similar to a trend analysis but the horizontal analysis is focused on the changes that you can see in the percentages while making comparisons. You need to calculate the percentage of increase or decrease of the same item between different time periods. This will give you a clear picture of whether everything in the company is changing very fast or very slowly
Cash Flow Analysis –
Analysing the cash flow in a company will help you to understand how that company is generating and using the cash. For this, you need to look into the various kinds of trends in investing and financing activities. A strong cash flow is very crucial for a company’s survival and growth. So, if there is no strong cash flow in the company, it will not be able to survive in the market for a very long time.
Now that you have understood how to analyse the numbers that you get to see in the financial statements, you also need to understand that there is much more that you need to do in order to analyse the financial statement of a company properly. There are certain questions that need answers. That way, you will be able to analyse the financial situation of a company. The questions are as follows –
- What are the company’s strengths and weaknesses?
- What are the current industry trends?
- Where does this company stand in comparison to its competitors?
- What are the potential risks that this company may face?
In order to get answers to all these you need to go through the company’s business model and various other important data.
To Wrap It Up,
There are kinds of analysis that you need to perform in order to properly analyse all the financial statements of a company that have been given to you in the form of an assignment. Some of these need to be done in the form of ratios, and some in the form of percentages. As these are all mathematical problems, you need to be very careful while solving them. If you’re ever unsure or pressed for time, you might even consider the option to pay for assignments to ensure everything is done accurately.