Financial analysis (also referred to as financial statement analysis or accounting analysis) refers to an assessment of the viability, stability and profitability of a business, sub-business or project.
It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions. Based on these reports, management may :
•Continue or discontinue its main operation or part of its business
• Make or purchase certain materials in the manufacture of its product
• Acquire or rent/lease certain machineries and equipment in the production of its goods
• Issue stocks or negotiate for a bank loan to increase its working capital
• Make decisions regarding investing or lending capital