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6 May, 2015 - 17:10

Financial statement analysis provides information to those interested in the financial condition and operating results of a company. When financial statement items are considered individually, they usually will have a limited significance. A better perspective is gained when comparisons are made with previous statements, other businesses and industry averages. The main purpose of conducting financial analysis is to measure profitability and solvency. A business which is not able to make interest payments will experience difficulty in obtaining credit. This could lead either to reduced profitability or bankruptcy. A company with lower than average earnings may also find credit harder and more expensive to obtain.