Financial Statement Analysis
Basics of Financial Statements
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Financial statements provide information about the financial activities and position of a firm.
Important financial statements are:
Cash flow statement
Balance sheet indicates the financial condition of a firm at a specific point of time. It contains information about the firm’s: assets, liabilities and equity.
Assets are always equal to equity and liabilities:
Assets = Equity +
Assets are economic resources or properties owned by the firm.
There are two types of assets:
Current assets (liquid assets) are those which can be converted into cash within a year in the normal course of business. Current assets include:
Cash and bank balance
Accounts receivable (debtors)
Non-Current assets are long-term assets.
Tangible fixed assets are physical assets like plant.
Intangible fixed assets are the firm’s
rights and claims
, such as patents,
, goodwill etc.
Gross block represent all tangible assets at acquisition costs.
Net block is gross block net of depreciation.
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