ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the various items of the balance sheet and the statement of profit and loss.

Detailed explanation-2: -Horizontal analysis is valuable because analysts assess past performance along with the company’s current financial position or growth. Trends emerge, and these can be used to project future performance. Horizontal analysis can also be used to benchmark a company with competitors in the same industry.

Detailed explanation-3: -Financial statements used in evaluating overall financial performance include the balance sheet, the income statement, and the statement of cash flows. Financial performance indicators are quantifiable metrics used to measure how well a company is doing.

Detailed explanation-4: -Overview: The balance sheet-also called the Statement of Financial Position-serves as a snapshot, providing the most comprehensive picture of an organization’s financial situation. It reports on an organization’s assets (what is owned) and liabilities (what is owed).