Meaning & Significance of Financial Assessment Assignment

Meaning & Significance of Financial Assessment - Assignment ExampleIt cares gain access to fast, independent and unquestionable financial assessment reports in order to take better decisions. It enables toachieve financial success. Financial assessment is based on past records and future projections. The telephoner can gain much better control over their financial performance by looking at the past in order to help plan and predict the future. A sound financial plan contains a complete picture of the financial health of the business and the viability of strategic plans. It also helps to hump whether the company is being run in a proper way during implementation, so that it can take preventive action before anything serious happens, for example, running play out of cash. Successful financial analysis and planning require an understanding of a companys external and internal environments (Analysis of Financial Statements Reviewing and Assessing Statements, 2006). Every effort shou ld prepare certain statements in order to ascertain the financial condition of the business, known as financial statements. A financial statement has an important purpose in the decision making lick. But the information in the financial statements is not effectively helpful in order to make a purposeful conclusion. Therefore, an effective and efficient analysis and interpretation of financial statements is necessary. Financial statement analysisis the process of identifying financial strengths andweaknessesof the firm by properly establishingrelationship betweenthe items of the balance sheet and theprofit and loss account (Financial Statement Analysis, 2012). Analysis means establishing a significant relationship between a number of items of twain financial statements with each other, in order to draw a meaningful conclusion. By financial statements we mean three statements i. Balance Sheet or spotlight Statement ii. Profit and loss Account or Income Statement iii. Cash flow st atement The term financial analysis is also known as analysis and interpretation of financial statements (Financial Statement Analysis- An Introduction n.d). Financial statement analysis is an evaluation to assess the efficiency and performance of the firm. Thus, it is very essential to musical rhythm the financial soundness, efficiency, profitability, and future prospects of business units. Financial analysis serves the following purposes Measuring profitability Indicating the trend of achievements Assessing the growth potential of the business Comparative position in relation to other firms Assess overall financial strength Assess solvency of the firm. Elements of financial assessment Analysis of financial statement is an important part of the process of developing a business plan, as it also helps to monitor the success of that plan. Elements of financial analysis include 1.Budgeting- Budgeting is an important element of financial analysis. Creating a reckon means setting out p lanned cash inflows and outflow of the business. It facilitates indentifying liquidity of the firm by