Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to warrant a monetary investment. It refers to an assessment of the viability, stability, and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios and other techniques, that make use of information taken from financial statements and other reports.
The most important benefit if financial statement analysis is that it provides an idea to the investors about deciding on investing their funds in a particular company. … Financial statement analysis is helpful to the government agencies in analyzing the taxation owed to the firm.