Financial Analysis

Description
Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to warrant a monetary investment.
If conducted internally, financial analysis can help fund managers make future business decisions or review historical trends for past successes.
If conducted externally, financial analysis can help investors choose the best possible investment opportunities.
Fundamental analysis and technical analysis are the two main types of financial analysis.
Fundamental analysis uses ratios and financial statement data to determine the intrinsic value of a security.
Technical analysis assumes a security's value is already determined by its price, and it focuses instead on trends in value over time.
Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. This is done through the synthesis of financial numbers and data. A financial analyst will thoroughly examine a company's financial statements—the income statement, balance sheet, and cash flow statement. Financial analysis can be conducted in both corporate finance and investment finance settings
One of the most common ways to analyze financial data is to calculate ratios from the data in the financial statements to compare against those of other companies or against the company's own historical performance.