The financial statement analysis is important as it provides meaningful information to the shareholders in taking such decisions. The management of the company is responsible for taking decisions and formulating plans and policies for the future.
1. Holding Of Share
Hold interpretations or analysis of the financial statements of a company is very important for the parties concerned mainly for the company itself. Financial Reports of a company, where the balance sheet reflects the value of the assets, debt and private equity at a particular moment, and profit loss report reflect the results achieved during a given period usually spans one year.
Shareholders are the owners of the company. Time and again, they may have to take decisions whether they have to continue with the holdings of the company's share or sell them out. The financial statement analysis is important as it provides meaningful information to the shareholders in taking such decisions.
2. Decisions And Plans
Obtain an overview of the development of financial companies need interpretation or analysis of the financial company in question, and data financial it will be reflected in the financial statements.
Holding an interpretation or analysis of the financial reports of a company will be very useful for analysis to be able to know the State and development of financial companies are concerned.
Hold a analysis against the financial statements of the company.
The management of the company is responsible for taking decisions and formulating plans and policies for the future. They, therefore, always need to evaluate its performance and effectiveness of their action to realize the company's goal in the past. For that purpose, financial statement analysis is important to the company's management.
3. Extension Of Credit
The company will be able to figure out the financial results that have been achieved at a long and time is running. By holding financial data analysis from year to year from the company's weaknesses as well as outcomes that are considered good enough.
The creditors are the providers of loan capital to the company.Therefore they may have to take decisions as to whether they have to extend their loans to the company and demand for higher interest rates. The financial statement analysis provides important information to them for their purpose.
4.Investment Decision
The prospective investors are those who have surplus capital to invest in some profitable opportunities. Therefore, they often have to decide whether to invest their capital in the company's share. The financial statement analysis is important to them because they can obtain useful information for their investment decision making purpose.
In addition the lenders any interested parties against the financial statements of a company that has been or will be the debtor or its customers. The lender before making a decision to grant or deny the request credit from a company, it should be held against a first analysis of the financial statements of the company, to be able to measure the company's ability to pay back the debt plus the interest burden.
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