There Are 4 Methods For Conducting Financial Statement Analysis

In compiling a good financial statement analysis, we need various sizes, relationships, and other information that can be used to assess the company’s financial position. Later, this analysis is useful to help the decision-making process related to policy, operational, and others. However, before you can even analyze your financial statements, you need to make sure that your financial data is accurate. In order to do so, we suggest you hire the best Xero bookkeeper parramatta.

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Here are four commonly used methods:

1. Comparative methods

This method is also called the comparison method. How to use it are the numbers in the financial statements compared with the figures in the previous year’s financial statements.

Another way we can use this method is to compare each relevant financial statement post or with significant data. Therefore, this method is also popular with the term Ratio Analysis Method.

2. Method of analysis

How to use this method is a technique of comparing financial statements of several years and describing them in a trend or graph. That is why this method is very useful for helping business people with statistical knowledge of their companies.

For example, using a formula by entering a trend that can be used to project future financial statements with historical data.

3. The Common Size Financial Statement Method

The name may be a bit of a coat, but the application is not like that, really! This method is an analysis that makes the financial statements in the form of presentations. The presentations made are usually related to an important amount. For example assets on the balance sheet and sales on the income statement.

4. Index Time Series Method

English term again, yes! But this method is easy to understand, which is to calculate using financial statements as an index and chosen as a base year. Usually, the base year selected or specified is given an index of 100. The following formula for this method.

Year Index (N) = (Year Nx 100% Report Rate): Base Figures