Financial analysis

[gsnindia]

Goals

Such an analysis has the objective to assess the firm's:

* performance, for the management to improve it,

* solvency, so as for a bank or a supplier to grant a credit,

* potential value to decide an investment or divestment. Then it is called fundamental analysis and is linked to business valuation and stock valuation

Methods

Financial analysts, among other tasks, use to compare financial ratios (of solvency, profitability, growth...)

* between several periods (the last 5 years for example)
* and between similar firms.

Those ratios are calculated by dividing a (group of) account balance(s), taken from the balance sheet and / or the income statement, by another, for example :

Net profit / equity = return on equity

Gross profit / balance sheet total = return on assets

Stock price / earnings per share = P/E-ratio

[vanessagarcia1]

Description contain informative information with example so easily recognise and utilise . Methods and goals are most important in this . I like this this information most among of all .
Net profit / equity = return on equity

Gross profit / balance sheet total = return on assets

Stock price / earnings per share = P/E-ratio