Question

Why do you think it is important to review the strategy of a company before and after completing a financial statement analysis? Explain.

Answer 1

Review of strategy of a company is important before starting and after completion of financial statement analysis because companies prepare budgets for the financial year on the basis of the strategies which the company is going to follow in the financial year so companys objectives are predefined and to achieve the objectives the present position of the company and course of action needed to achieve those goals are studied. once the financial statements are prepared and financial statement analysis is done then actual results obtained after the financial statement analysis are compared with the results obtained before the financial statement analysis and a comparative study is made to check whether the target set are achieved or not. if there is any discrepency between the planned and actual results then review of strategy is important to reduce the variances between the actual and standard results.