Discuss the advantages of Financial Statement Analysis.
Explanation
1) This statement is useful to the management as guidance, as it explains always the fund’s movement in the organization.
2) Company managers can compare sources with other sources and ascertain the results. If the style of change is not observed, it may lead to financial problems.
3) If the company depends on external sources for additional funds, it becomes a burden on capital structure; the working capital of the organization can be increased by reducing other liquid assets.
4) The funds flow statement shows ways for this purpose. It is useful to the management as a good tool to understand the fund’s movement in the organization very easily.
5) It is useful to forecast funds flow. It can also be used to know the working capital requirements. It provides reasonable time to ascertain future funds requirements and make suitable arrangements to get the same.