ABSTRACT

FINANCIAL ANALYSIS AND ECONOMIC REALITY Financial analysis is a means of finding out about a company’s performance over time in the markets in which it operates. We also want to know about its financial status (level of debt and short-term liquidity). The diagram opposite shows a framework which we can use for these purposes. We can relate some items to others (for example profit to sales and profit to investment). But to understand the economic realities of the business in its market environment, we need to identify changes taking place through time.