The objectives of financial statement analysis are to gain insights and make informed decisions about a company’s financial performance, position, and prospects. Here are the main objectives of financial statement analysis:

1. Assess Financial Performance: Financial statement analysis helps evaluate a company’s past financial performance by examining its income statement, balance sheet, and cash flow statement. It assesses the company’s profitability, revenue growth, cost structure, and overall financial results over a period of time. This information aids in understanding the company’s ability to generate profits and its efficiency in managing costs.

2. Evaluate Financial Position: Financial statement analysis provides insights into a company’s financial position by analyzing its balance sheet. It assesses the company’s liquidity (ability to meet short-term obligations), solvency (ability to meet long-term obligations), and overall financial stability. This information helps evaluate the company’s ability to repay debts and sustain its operations in the long run.

3. Identify Trends and Patterns: Financial statement analysis helps identify trends and patterns in a company’s financial performance over time. By analyzing financial ratios, changes in key financial metrics, and comparing financial statements from different periods, analysts can identify areas of improvement, areas of concern, and overall performance trends. This information is crucial for decision-making and strategic planning.

4. Assess Risk and Return: Financial statement analysis aids in assessing the risk and return associated with investing in or lending to a company. It helps identify potential risks, such as excessive debt levels, declining profitability, or liquidity constraints. By evaluating the company’s financial health and performance, investors and lenders can make informed decisions about the risk they are willing to take and the potential return on their investment or loan.

5. Support Decision-Making: Financial statement analysis provides valuable information for decision-making across various areas of the business. It helps in evaluating investment opportunities, assessing creditworthiness, determining pricing strategies, making capital allocation decisions, evaluating the performance of business units or projects, and assessing the financial implications of potential business decisions.

6. Comparisons and Benchmarks: Financial statement analysis allows for comparisons of a company’s financial performance and position with industry peers, competitors, and benchmarks. This benchmarking helps assess how the company is performing relative to its peers and provides insights into areas of strength and areas that need improvement.

Overall, the objectives of financial statement analysis are to provide a comprehensive understanding of a company’s financial performance, position, and risks, enabling stakeholders to make informed decisions and take appropriate actions to enhance profitability, financial stability, and long-term success.