# financial statement analysis

financial statement analysis is the process of understanding the risk and profitability of a firm in which include business, sub-business or project. through analysis of reported financial information, by using different accounting tools and techniques.

## Limitations of Financial Statement Analysis

Limitations of Financial Statement Analysis: Although financial statement analysis is highly useful tool, it has two limitations. These two limitations involve the comparability of financial data between companies and the need to look beyond ratios. Comparison of Financial Data: Comparison of one company with

## Financial Statement Analysis

Financial Statement Analysis Learning Objectives: Prepare and interpret financial statements in comparative and common-size form. Compute and interpret financial ratios that would be most useful to a common stock holder. Compute and interpret financial ratios that would be most useful to a short-term creditor

## Proprietary Ratio or Equity Ratio

Proprietary Ratio or Equity Ratio: Definition: This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net worth to total assets ratio. This ratio relates the shareholder’s funds to total assets. Proprietary / Equity ratio indicates the long-term

## Earnings Per Share (EPS) Ratio

Earnings Per Share (EPS) Ratio: Definition: Earnings per share ratio (EPS Ratio) is a small variation of return on equity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares. Formula of