What are the types of financial analysis? Explain at least three.

4 years ago
Financial Management

This is a basic finance question for those intermediate in the field. 

Liquidity Analysis is one of the many types. It utilises the company’s balance sheet to gauge whether it can fulfill short-term obligations. This is done through the use of different methods including:

  • Current Ratio ( Current Ratio = Current Assets/ Current Liabilities)
  • Acid Test
  • Net Working Capital

Leverage Analysis is used for evaluating a business’s performance. This is commonly done through finding the debt/equity ratio, DuPont analysis model, etc. 

Vertical Analysis refers to checking the different components of a company’s income statement. Each of these components is then divided by the business’s revenue. Using the result, an enterprise should compare with other businesses in its related industry. 

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Sanisha Maharjan
Sanisha Maharjan
Jan 18, 2022
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