Comparative Statement Analysis

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Recommended: Analysis of financial statement

Chapter 1
INTRODUCTION
A financial statement (or financial report) is a formal record of all the financial actions/activities and the position of a business venture, person, or any other entity. Pertinent fiscal information is presented in a very systematic and structured manner and in a form that is easy to comprehend. Data that are recorded in the financial statements are affected by Accounting Principles, Accounting Concepts and Conventions, Recorded facts and Personal Judgments. The essential qualities of any Financial Statements are-
• Relevance
• Understandability
• Reliability and Accuracy
• Comparability
• Completeness
• Timeliness
A typical financial statement includes the following accompanied by a management discussion and analysis. …show more content…

Tools for Financial Statement Analysis-
i. Comparative Statement: A comparative statement is a financial document that evaluates and compares a specific financial statement with statements from earlier period or with the same financial information produced by another company or same company. There are two types of comparative statements i.e. comparative income statement analysis and comparative balance sheet analysis. ii. Common Size Statement: Common size statements are financial documents in which individual figures of each item are converted into %ages considering a common base. The %age of each of these individual items show their relation to their respective total. Such type of analysis is also called Vertical Analysis. It is because each of the accounting variables are analyzed vertically. These statements may be prepared for income statements as well as balance sheets. A common size balance sheet is a statement in which the total of liabilities or assets is taken as 100 and all numbers/data is expressed in %age of the …show more content…

comparative statements, common size statements and trend analysis. For large corporations, these statements may be complex and may include an extensive set of footnotes to the financial statements and management discussion and analysis. The notes typically describe each item on the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements. In the following project I'll only be taking the taking balance sheet and profit and loss accounts of Berkshire Hathaway Inc. for this

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