Homework help > What is the purpose and importance of financial an... > Published by: CPA Guru 3 years ago
By: CPA Guru
Subject: Finance

What is the purpose and importance of financial analysis ...[Show More]

3 years ago

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Financial evaluation involves the evaluation of businesses, projects, budgets and other finance-related operations, in an effort to determine their performance and suitability (Kenton, 2018). The financial analysis evaluates business profitability, liquidity, and solvency. Financial analysts utilize financial statements in the analysis process. Financial statement analysis is important because of different reasons. Firstly, financial statement analysis is critical in the conclusion of whether or not to hold a company’s share. Financials statement analysis provides the information needed by stockholders on whether to keep or sell a particular firm’s share. Financial statement analysis is also essential in making decisions and plans by a company’s management. Creditors and lenders also utilize financial statement analysis to determine whether there will be an extension of credit to the business.

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