METHODS OF ANALYSIS

Methods of Analysis



Methods of Analysis

Introduction

Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. There are a variety of tools used to evaluate the significance of financial statement data. Three of the commonly used tools are the ratio analysis, horizontal analysis, and vertical analysis. These tools are elaborated below.

Ratio Analysis

Financial analysts use a broad range of techniques that are known as ratio analysis, collectively. The general procedure involves calculating various financial ratios -- such as profit margin, accounts receivable-to-sales, and inventory turnover ratios -- and comparing them to ...