Tag Archives | Financial Analysis

Classification of Cash Flow Statement | Accounting

A cash flow statement aims to determine the effects of cash of different type of cash inflows and outflows. In this process, all cash flows are classified into three categories:- 1. Cash flows from Operating Activities 2. Cash flows from Investing Activities 3. Cash flows from Financing Activities. 1. Cash Flows from Operating Activities: The […]

Cash Flow Statement (As per AS 3) | Accounting

In this article we will discuss about:- 1. Introduction to Cash Flow Statement 2. Meaning of Cash Flow Statement 3. Definition 4. Objectives 5. Scope 6. Benefits. Introduction to Cash Flow Statement: In June 1981, the Institute of Chartered Accountants of India issued Accounting Standard 3: Changes in Financial position. This accounting standard dealt with […]

Cash Flow Statement: Uses and Limitations | Accounting

In this article we will discuss about the uses and limitations of cash flow statement. Uses of Cash Flow Statement: A Cash Flow Statement is of primary importance to the financial management. It is an essential tool of short-term financial analysis. Its main uses are as follows: 1. Cash Flow Statement facilitates to prepare sound […]

Preparation of Cash Flow Statement (With Example)

In this article we will discuss about the preparation of cash flow statement, explained with the help of suitable illustrations. The Cash Flow Statement should report cash flows during the period classified by operating, Investing and Financing Activities. An enterprise presents its cash flows from operating, investing and financing activities in a manner which is […]

Users of Ratio Analysis | Accounting

In this article we will discuss about the users of ratio analysis in accounting. Ratio analysis of a firm’s financial statements is of interest to a number of parties, mainly, share-holders, creditors, debtors, firm’s own management etc. People in various walks of life are at present interested in ratio analysis though in different ways and […]

Classification of Combined Ratios | Accounting

In this article we will discuss about the classification of combined ratios in accounting. They are:- 1. Activity Ratios or Turnover Ratios 2. Profit Cover Ratios. 1. Activity Ratios or Turnover Ratios: This category of ratios includes those ratios, which highlight upon the activity and operational efficiency of the business concern. The funds of creditors […]

Profitability Ratios and it’s Categories | Accounting

The profitability of the firm is also measured in relation to investments. The term investment may refer to total assets, capital employed or the owners’ equity. The efficiency of an enterprise is judged by the amount of profits. But sometimes the conclusion drawn on the basis of profit-to- sales ratios may be misleading. Because it […]

Importance of Ratio Analysis | Accounting

The importance of ratio analysis are:-  1. Aid to Measure General Efficiency 2. Aid to Measure Financial Solvency  4. Facilitate Decision-Making 5. Aid in Corrective Action 6. Aid in Intra Firm Comparison 7. Act as a Good Communication 8. Evaluation of Efficiency 9. Effective Tool 10. Detection of Unfavourable Factors.   1. Aid to Measure General […]

Limitations of Ratio Analysis | Accounting

Some of the limitations of the ratio analysis are:- 1. Differences in Definitions 2. Limitations of Accounting Records 3. Lack of Proper Standards 4. No Allowances for Price Level Changes 5. Changes in Accounting Procedure 6. Qualitative Factors are Ignored 7. Limited Use of Single Ratio 8. Background is Overlooked 9. Limited Use 10. Personal […]

Classification of Ratios | Accounting

In this article we will discuss about the classification of ratios in accounting. The accounting ratios may be classified on the following bases leading to somewhat overlapping categories: (A) Classification by Statements: The Traditional classification is based on those statements from which information is obtained for calculating the ratios. The ratios are classified as follows: […]

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