The focus of financial analysis is on key figures in the financial statements and the significant relationship that exists between them. The analysis of financial statement is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the position and performance of a firm. The first task of the financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step is to arrange the information in a way to highlight significant relationships. The final step is interpretation and drawing of inferences and conclusions. In brief, financial analysis is the process of selection, relation and evaluation.
Keeping all this in view, the present book is devoted to an in-depth analysis of financial statements and its use for decision-making by various parties interested in them. The focus of the book is on ratio analysis which is the most widely used technique of financial statement analysis.