## What is Financial Statement Analysis?

Financial Statement Analysis is the process of understanding the fundamentals of the company by reviewing its financial statements namely the Income Statement, Balance Sheet and Cash Flows. Financial Statement Analysis can be performed in a structured way using Ratio Analysis. Typically, such financial analysis is done over a series of reporting periods (using the Horizontal Analysis and Vertical Analysis).

Financial Statement Analysis includes comprehensively analyzing the company's liquidity ratios, turnover ratios, profitability ratios, efficiency ratios, dividend ratios, and debt ratios.

You can learn step by step Financial Statement Analysis from the following guide

Related Financial Statement Analysis Articles:

### Liquidity Ratios

#### WHAT YOU'LL LEARN

Liquidity ratio in Financial Analysis provides us with an understanding that whether the company will be able to serve its short-term liabilities (current liabilities) with the help of its short-term assets (current assets). This helps an analyst understand whether the company has enough cash in the system to survive for atleast one operating cycle. Liquidity Ratios include current ratios, quick ratio, cash ratio, defensive interval ratio and working capital ratio.

#### 34 RESOURCES

- Accounting Liquidity
- Acid Test Ratio Formula
- Altman Z Score
- Bid Ask Spread
- Capital Adequacy Ratio
- Cash Flow from Operations Ratio
- Cash Flow Per Share
- Cash Ratio
- Cash Ratio Formula
- Cash Reserve Ratio
- Cash Reserve Ratio Formula
- Change in Net Working Capital (NWC) Formula
- Changes in Net Working Capital
- Current Ratio
- Current Ratio Formula
- Current Ratio vs Quick Ratio
- Defensive Interval Ratio
- Equity Ratio
- Equity Ratio Formula
- Liquidity
- Liquidity Risk
- Liquidity vs Solvency
- Net Working Capital Formula
- Operating Cycle Formula
- Quick Ratio
- Quick Ratio Formula
- Reserve Requirement
- Solvency
- Solvency Ratios
- Working Capital Formula
- Working Capital Ratio

### Turnover Ratios

#### WHAT YOU'LL LEARN

This ratio in financial analysis helps us understand the how effectively the firm is utilizing its resources. This ratio effectively tracks the flow of cash from sales activity to receivables, inventory, and payables. Turnover Ratios include the inventory turnover, receivables turnover and payables turnover. Also, you can calculate the cash conversion ratio using the three turnover ratios to find out the length of cash cycle.

#### 25 RESOURCES

- Accounts Payable Turnover Ratio
- Accounts Receivable Turnover
- Accounts Receivables Turnover Ratio
- Activity Ratios
- Average Collection Period
- Cash Conversion Cycle
- Cash Conversion Cycle (CCC) Formula
- Days in Inventory
- Days Inventory Outstanding
- Days Payable Outstanding
- Days Sales Outstanding
- Days Sales Uncollected
- Debtor Days Formula
- Fixed Asset Turnover Ratio Formula
- Inventory Ratio
- Inventory Turnover Ratio
- Stock Turnover Ratio
- Stock Turnover Ratio Formula
- Working Capital Turnover Ratio

### Profitability Ratios

#### WHAT YOU'LL LEARN

Profitability Ratios in Financial analysis are that helps us understand whether the company is able to generate enough sales relative to its expenses during a specified period. This is one of the most popular ratios used by Financial Analysts and they include the gross margin, EBIT Margin, EBITDA Margin and the Net Profit Margin. Other popular ratios are the Return on Equity, Return on Invested Capital

#### 84 RESOURCES

- Basic EPS
- Basic EPS vs Diluted EPS
- Cap Rate Formula
- Capacity Utilization Rate Formula
- Capital employed Employed
- Capital Gains Yield
- Capital Intensity
- Capitalization Rate
- Cash on Cash Return
- CFROI
- Common Size Income Statement
- Comparative Income Statement
- Contribution Margin Formula
- Degree of Operating Leverage Formula (DOL)
- Diluted EPS
- Diluted EPS Formula
- DuPont Formula
- Earnings Per Share
- Earnings Per Share Formula
- EBIT Margin Formula
- EBIT vs EBITDA
- EBITDA Margin
- EBITDAR
- Gross Profit Margin Formula
- Gross Profit Percentage
- Gross Profit Ratio
- Invested Capital
- Invested Capital Formula
- LTM Revenue
- Markup
- Markup Percentage Formula
- Net Interest Margin Formula
- Net Profit Margin Formula
- NOPAT Formula
- OIBDA
- Operating Expense Ratio Formula
- Operating Income Formula
- Operating Leverage
- Operating Profit Margin Formula
- Operating Ratio
- Operating Ratio Formula
- Overhead Ratio Formula
- Profit Formula
- Profit Margin
- Profit Margin Formula
- Profit Percentage Formula
- Profitability
- Profitability Ratios Formula
- Rate of Return on Investment
- Return on Assets Formula
- Return on Average Assets (ROAA)
- Return on Average Capital Employed
- Return on Average Equity (ROAE)
- Return on Capital Employed (ROCE)
- Return on Equity (ROE)
- Return on Equity Examples
- Return on Equity Formula
- Return on Equity Ratio
- Return on Invested Capital (ROIC)
- Return On Investment (ROI)
- Return on Investment Formula (ROI)
- Return on Sales
- Return on Sales Formula
- Return on Total Assets (ROA)
- Return on Total Assets Formula
- Revenue Per Employee Ratio
- ROCE Formula (Return on Capital Employed)
- ROE vs ROA
- ROIC Formula (Return on Invested Capital)
- ROIC vs ROCE
- Tax Equivalent Yield
- Total Expense Ratio Formula
- Unit Contribution Margin
- Variable Costing Formula
- Vertical Analysis of Income Statement

### Efficiency Ratios

#### WHAT YOU'LL LEARN

Efficiency ratios in Financial Analysis measures how effectively the company makes use of its assets relative to its liabilities (equities) for generating sales. Efficiency ratios include the asset turnover ratio, equity turnover ratio, and equity multiplier.

### Dividend Ratios

#### WHAT YOU'LL LEARN

The company generally shares a part of its profit with its shareholders via dividends in a given period. This share of profit in form of dividends depends on the growth phase of the company. Dividend Ratios capture the relative value of this part using the dividend payout ratio, plowback ratio, and the retention ratio.

### Debt Ratios

#### WHAT YOU'LL LEARN

This financial statement analysis ratio provides us with an understanding of how much the company is dependent on debt relative to equity. Debt Ratios are of various types including the debt to equity ratio, capital gearing ratio, DSCR Ratio, interest coverage ratio and more.

#### 28 RESOURCES

- Capital Gearing Ratio
- Capitalization Ratio
- Coverage Ratio
- Coverage Ratio Formula
- Current Yield
- Debt Coverage Ratio
- Debt Ratio
- Debt Service Coverage Ratio (DSCR)
- Debt to Asset Ratio Formula
- Debt to Equity Ratio
- Debt to Income Ratio Formula (DTI)
- Debt Yield Ratio
- Degree of Financial Leverage Formula
- DSCR Formula (Debt service coverage ratio)
- Financial Leverage Formula
- Financial Leverage Ratio
- Gearing Ratio Formula
- Interest Coverage Ratio
- Leverage Ratios
- Leverage Ratios for Banks
- Leverage Ratios Formula
- Net Debt Formula
- Operating Leverage vs Financial Leverage
- Overcapitalization
- Solvency Ratio Formula
- Times Interest Earned Ratio
- Times Interest Earned Ratio Formula

### Ratio Analysis in Finance

#### 17 RESOURCES

- Accounting Ratios
- Balance Sheet Ratios
- Beneish M-Score
- Common Size Balance Sheet
- Examples of Financial Analysis
- Financial Analysis
- Financial Analysis Tools
- Financial Ratios
- Horizontal Analysis
- Importance of Ratio Analysis
- Ratio Analysis Limitations
- Ratio Analysis Types
- Trend Analysis
- Types of Financial Analysis
- Types of Financial Ratios
- Vertical Analysis
- Vertical Analysis Formula