ABSTRACT
The full integrated set of financial statements (namely the balance sheet, profit and loss account, and source and application of funds statement), which are published externally and normally produced internally for management control purposes, contain the basis for a very extensive financial analysis of the current position of the business. We have already seen that a number of managerial judgements are required in their preparation and that it is important to place the published results into their proper context. For example, knowing that a business made a profit of £5 million last year does not enable us to decide whether this was a good or bad achievement. If it related to the business recently started by George Taylor the result is clearly incredible; but if the results were for a leading multinational company which previously had reported annual profits consistently in excess of £100 million it represents a major disaster for the business.
