Question

Why analyze financial ststements? As organization, how do finacial statements contribute to th decission making process? As an individual investor, how are financial statements helpful when making investment decissions? If you wanted to invest $1,000 in a soft drink company, and you narrow you chocie down betewwn Coke and Pepsi, where would look to find each company's respective financiall statements? Based on the most current information, which company would choose and why?

Answer 1

The FinancialStatements Will help in DecisionMaking in the following Ways.

1. Difference Ratios generated from Financial statements will help to understand solvency and liquidity of the company that will enable the management to plan fund utilization accordingly.

2. comparing financial statement with past years is helpful to understand company's growth.

3. The divisional wise financial statement will help to understand divisional performance and plan accordingly.

4. from financial ratios the management can find out the cost of capital and restructure the capital structure accordingly to get maximum capital at the minimum cost.

5. Comparing the Actual financial statement with the budgeted financial statements at the begening of the year will help the management to understand how much company achieved against the budgeted targets.

Individual Investment Decision

in making investment decision the information regarding EPS, Net income, Creditors etc will help taking an investment decision.if EPS and Net income show a growing trend as well as company is having the immense financial capacity to meet its creators due on time are the best to invest.

As I explained in the last paragraph The company show highest trend on the above-said factors is best to invest.