Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. External stakeholders use it to understand the overall health of an organization as well as to evaluate financial performance and business value.Financial statement analysis is the process of reviewing and analyzing a company's financial statements to make better economic decisions to earn income in future. These statements include the income statement, balance sheet, statement of cash flows, notes to accounts and a statement of changes in equity.What are the types of financial statement analysis?
Types of Financial Analysis
#1 – Horizontal Analysis. ...
#2 – Vertical Analysis.
#3 – Trend Analysis.
#4 – Liquidity Analysis. ...
#5 – Solvency Analysis.
#6 – Profitability Analysis.
#7 – Scenario & Sensitivity Analysis.
#8 – Variance Analysis.Why is financial statement analysis important?
It provides internal and external stakeholders with the opportunity to make informed decisions regarding investing. Financial statement analysis also provides lending institutions with an unbiased view of a business's financial health, which is helpful for making lending decisions.