The Sage Course Companion on Financial Accounting is an accessible introduction to the subject that will help readers to master key concepts and enhance their thinking skills in line with course requirements. It provides support on how to revise for exams and prepare for and write assessed pieces.

Analysis of Company Financial Statements

Analysis of Company Financial Statements

Analysis of company financial statements

Once a business has produced its financial statements an important next step is to interpret the information that has been provided. This interpretation can help the owner, partners or shareholders to evaluate the information contained in the financial statements to draw inferences and conclusions.

A key analytical tool in examining accounts is the use of ratio analysis. Ratios are concerned with the relationship between key figures in financial statements. Ratios can be used to establish and compare a trend of figures within the same business or to compare similar sized businesses in the same sector with each other.

Although there are no definitive categories of ratios, it is often convenient to classify ratios under the following key headings:

  • profitability
  • liquidity
  • efficiency
  • financial


Profitability can ...

  • Loading...
locked icon

Sign in to access this content

Get a 30 day FREE TRIAL

  • Watch videos from a variety of sources bringing classroom topics to life
  • Read modern, diverse business cases
  • Explore hundreds of books and reference titles