Answer: 1. Financial analysis involves examining financial statements, such as income statements, balance sheets, and cash flow statements, to evaluate the financial performance and health of a company.
2. It helps in assessing the profitability, liquidity, solvency, and overall financial stability of a business.
3. Ratios and financial metrics are commonly used in financial analysis to interpret and compare financial data. Examples include profitability ratios (e.g., gross profit margin, net profit margin), liquidity ratios (e.g., current ratio, quick ratio), and leverage ratios (e.g., debt-to-equity ratio).
4. Financial analysis is crucial for decision-making purposes, such as evaluating investment opportunities, assessing creditworthiness, or making strategic business decisions.
5. Common techniques used in financial analysis include trend analysis, comparative analysis, ratio analysis, and benchmarking against industry standards.
Step-by-step explanation:
It's important to note that financial analysis can be a complex field, and there are various methodologies and tools used depending on the specific goals and context of the analysis.