Analysis of financial statement

1. What is the advantage of analyzing a company’s financial statements over a series of years rather than just for the current period?

2. Why are external standards important?

3. What is a financial ratio?

4. If you know a company has a current ratio of 2 to 1, why is that not enough information to judge its liquidity?

1. Who are the major user groups of financial statements, and how do their perspectives on the analysis of financial statements differ?

2. What is meant by comparative financial statements and how are they used in horizontal analysis?

3. Briefly explain what is meant by liquidity analysis, and state why it is important.



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