To understand and value a company, investors examine its financial position by studying its financial statements and calculating certain ratios. Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability. Typically, financial analysis is used to analyse whether an entity is stable, solvent, liquid, or profitable enough to warrant a monetary investment. Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. This is done through the synthesis of financial numbers and data. The financial analysis consists of studying three paramount sections of the annual report and analysing them in detail. These three sections are: Balance sheet, Profit & Loss statement and Cash Flow statement. The aim is to find companies, which have a healthy financial position that can offer the potential for future growth.

Vaisakh JP

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