Finance

The four financial statements—the balance sheet, income statement, statement of cash flows, and statement of changes in owner’s equity—are all interrelated. Each statement provides valuable insight into the financial health of the company, but they should be looked at together to get a complete picture of the financial position of an organization. Financial analysis is the process of examining an organization’s financial statements to assess its liquidity, solvency, and profitability. Financial analysis techniques such as vertical and horizontal analysis, ratio analysis, and common size analysis can be used to compare financial performance and identify trends over time. Financial ratios measure specific relationships between items from the financial statements, such as current ratio, profit margin, and return on assets, and can be used to compare the performance of a single organization over time or between different organizations in the same industry. This data provides useful insights into an organization’s financial condition and can facilitate better decision-making.