“Performance Evaluation of Financial Statements by the Use of Ratio”
“Performance Evaluation of Financial Statements by the Use of Ratio”
ACC-1221/09
In partial fulfillment of the requirements for the award of BBA (ACCOUNTING)
During the period 2008-2011
Chapter one
Introduction
1. Background
Financial statements are formal records of the financial activities of a business, person and other entities .Financial statements are all relevant financial information that are presented in a structured manner and in a form easy to understand to be used by parties both internal and external to the business enterprise .In addition, these statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.
To ensure uniformity and comparability of the reports, general accounting principles are followed. These principles are commonly referred to as Generally Accepted Accounting Principles. These set of guidelines provide the basis in the preparation of financial statements.
These statements are prepared to meet external reporting obligations and also for decision making purposes. It plays a dominant role in setting the framework of managerial decisions. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful for users.
Financial analysis is the process of understanding the risk and profitability of a firm through analysis of reported financial information annual /quarter reports in a systematic way. Analysis is the foundation of evaluating performance performed in the enterprise/business statements.
Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as
ACC-1221/09
In partial fulfillment of the requirements for the award of BBA (ACCOUNTING)
During the period 2008-2011
Chapter one
Introduction
1. Background
Financial statements are formal records of the financial activities of a business, person and other entities .Financial statements are all relevant financial information that are presented in a structured manner and in a form easy to understand to be used by parties both internal and external to the business enterprise .In addition, these statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.
To ensure uniformity and comparability of the reports, general accounting principles are followed. These principles are commonly referred to as Generally Accepted Accounting Principles. These set of guidelines provide the basis in the preparation of financial statements.
These statements are prepared to meet external reporting obligations and also for decision making purposes. It plays a dominant role in setting the framework of managerial decisions. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful for users.
Financial analysis is the process of understanding the risk and profitability of a firm through analysis of reported financial information annual /quarter reports in a systematic way. Analysis is the foundation of evaluating performance performed in the enterprise/business statements.
Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as