COMPARATIVE FINANCIAL STATEMENT ANALYSIS PDF

 Comparative financial statement analysis is a process of evaluating the financial health and performance of a company over a specific period of time. It involves comparing the financial statements of a company to its industry peers, as well as to its own financial statements from previous periods. The primary purpose of this analysis is to identify trends, assess the company's strengths and weaknesses, and make informed business decisions.

COMPARATIVE FINANCIAL STATEMENT ANALYSIS PDF

There are several types of financial statements that can be compared in a comparative financial statement analysis. These include the balance sheet, income statement, statement of cash flows, and statement of shareholder equity.

The balance sheet is a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and equity. Comparative balance sheets can be used to compare a company's financial position over time, as well as to its peers. By comparing the balance sheets of different companies, analysts can identify differences in their financial structure, such as the proportion of debt to equity, the amount of liquid assets, and the level of investment in fixed assets.

The income statement shows a company's revenue and expenses over a specific period of time, such as a month or a year. By comparing the income statements of different companies, analysts can identify trends in revenue and expenses, as well as the profitability of the company.

The statement of cash flows shows the inflow and outflow of cash for a specific period of time. It is useful for analyzing a company's liquidity and financial flexibility. By comparing the statements of cash flows of different companies, analysts can identify differences in their sources and uses of cash.

The statement of shareholder equity shows the changes in a company's equity over a specific period of time. It is useful for analyzing the performance of a company's equity-raising activities, such as issuing new stock or repurchasing outstanding stock.

There are several methods that can be used in a comparative financial statement analysis. One common method is horizontal analysis, which involves comparing financial statements over a specific period of time, such as comparing the current year's financial statements to the previous year's. Another method is vertical analysis, which involves expressing each item in a financial statement as a percentage of a base amount, such as total assets or total revenue.

In addition to these methods, analysts may also use financial ratios to compare financial statements. Financial ratios are calculated by dividing one financial statement item by another. Some common financial ratios used in comparative financial statement analysis include the debt-to-equity ratio, which measures a company's financial leverage, and the return on equity, which measures a company's profitability.

Overall, comparative financial statement analysis is a valuable tool for investors, creditors, and management to evaluate the financial health and performance of a company. By comparing financial statements and using various analytical techniques, stakeholders can make informed business decisions and identify areas for improvement.