6 tools for Financial Statement Analysis every investor should know

6 tools for Financial Statement Analysis every investor should know

Financial statement analysis tools can help investors gain a better understanding of the financial status of a business. It can provide valuable insights into whether a company is on track to meet its targets, how much funding it needs and how its cash flow is performing. It also helps investors to identify potential risks and weaknesses in the business, which can help them, make more informed investment decisions. In addition, financial statement analysis tools can be used to calculate the financial performance of a company based on key metrics, such as revenue and profit. This can be useful for companies that measure performance in different ways and want to compare their results against one another. Financial statement analyzers can be used by individual and institutional investors such as mutual funds or hedge funds.

What are the types of financial statement analysis? 

1.      Horizontal analysis is an important and useful technique for understanding trends across different regions, countries, or organizations. Horizontal analysis is a broad concept that covers various kinds of research methods, including the analysis of sets of data from the same country at different points in time, sets of data from different countries at different points in time, and sets of data from the same organization at different points in time. 

2.      Vertical financial analysis is one of the most popular types of analysis. The objective is to measure a company’s performance relative to its peers. Most companies base their decisions on the financial information they glean from the financial statements they receive from the outside auditor. If a company’s numbers compare favourably to those of its peers, then a business executive will have confidence in its ability to perform in the future. 

What are the tools for financial statement analysis? 

1.     Ratio analysis is a useful tool for recording financial information. It helps in understanding how one measure relates to another. To do ratio analysis, we need to know how to add two figures together. This can be done by adding the values of two items measured on a balance sheet. For example, we can take a company’s balance sheet and evaluate the ratio of its outstanding loans to equity in its balance sheet. The debt-equity ratio is a useful indicator of how a company is financial. A negative or low number indicates that a company is in the red with loans out-sized by equity. 

View More :  Harnessing the Power of Online Advertising for Mortgage Lead Generation

2.     When properly used, the common-size statement can be an important tool for assisting managers, investors and business analysts in evaluating the company’s financial statements. It is also helpful in assessing trends, emerging issues and potentially volatile items in the company’s financial statements. A common base figure is a large number to give a firm a secure foundation. The base figure can be found by taking the assets or equity figure and dividing it by the liabilities figure. The ratio is then given a uniform decimal format to facilitate analysis. 

3.     Comparative financial statements are important for any organization because they provide an objective perspective of its development. By comparing the data from two sets of financial statements, one can see how the company has grown and is doing. Comparative financial statements can also show how performance changes over time. This is significant because past performance is never a guarantee of future performance. 

4.     Trend analysis is an important tool in the arsenal of financial statement analysis. It provides an opportunity to gain insight into what is happening over time and helps make informed decisions. Each series of financial statements is analyzed as a trend. The trends of one organization may be different from that of another. The analysis of trends is more significant when we compare the two organizations. 

5.     The funds flow statement links the three components of a fund. The funds flow statement is the link that unites the three components. A fund comprises three accounts: assets, liabilities, and equity. The three stands in a row, with the equity account at one end and the other two at the other end, as you look at the right-hand side of a fund’s balance sheet. 

6.     A cash flow statement is a primary financial statement of an organization, which shows how Cash and Cash Equivalents in a business are affected by changes. And it also describes how-to guides in various components of Balance Sheets and Profit and Loss Accounts. It summarizes the reasons behind the changes in the cash position of a business entity between the dates of the two balance sheets. 

View More :  How can bitcoin affect Lenovo?

What are the different advantages of financial statement analysis tools? 

1.     Financial statement analysis tools provide the transparency lacking in many other types of analysis. With this type of tool, you can see exactly how much money your business is making or losing on a daily basis. 

2.     Another advantage of financial statement analysis tools is that they can reduce the time and effort it takes to process your financial data. This makes them particularly useful for small businesses that may not have the resources to hire an accountant or other professional staff member. 

3.     Financial statement analysis tools make it easier to compare your business to its competitors. You can see how they measure up on key metrics like revenue, profit margin, etc., and use this information when making strategic decisions about how to grow your business. 

What is the importance of financial statement analysis for business growth? 

Financial statement analysis is an essential part of any business. It allows you to measure the financial health of your company. This can help you identify problems early and take steps to address them. It can also help you make informed decisions about growth and investment. An excellent financial statement analysis can help you answer the following questions: – 

1.       What is the current state of your finances? Are there any problems that need to be addressed right away?  

2.       Where do you want to be in the future? How much money will it take to get there? What kind of resources will you need?  

3.       How will you know if you’re getting closer to your goals? When are you likely to reach them?



Financial analytics tools provide decision-makers with a consistent and transparent view of the company’s financial performance and the reporting on drivers and risks that influence the business. Perfios financial statement analysis tools are a complete solution for your financial management needs, with a proven track record of providing high-quality financial analytics quickly. Perfios offers a range of financial reports which can be tailored to the specific needs of the business. It is easy to use and offers all the functionality you need to analyze, report and manage your business successfully. It is a comprehensive and powerful financial software solution that enables businesses to gain a competitive edge and improve their financial viability.

Also read: Why you need aid like financial software





Was this article helpful?


Shankar is a tech blogger who occasionally enjoys penning historical fiction. With over a thousand articles written on tech, business, finance, marketing, mobile, social media, cloud storage, software, and general topics, he has been creating material for the past eight years.