Financial analysis is a process of evaluating the financial strengths and weaknesses of the company by establishing an efficient relationship between the financial statements’ items. As Ravinder and Anitha (2013) discuss in their article, knowing the operational efficiency “will enable the management to locate weak spots of the business and take necessary remedial action” (p. 11). In this regard, identifying the company’s weaknesses is crucial since it allows for implementing steps to convert disadvantages into strengths.
In the given study, a comparative statement analysis was used to evaluate the financial performance of Bambino Agro Industries Limited. Ravinder and Anitha (2013) conducted a Comparative Income Statement analysis and a Comparative Balance Statement analysis for the company under review. As a result, the authors could interpret the data and understand the operational efficiency of Bambino Agro Industries Limited. It was found that the company’s overall financial performance was unsatisfactory. Therefore, the authors could identify the weak spots, such as a decrease in raw materials and credit sales, reduced debtors, and others (Ravinder & Anitha, 2013). The next step was to offer suggestions for the company to recover its overall financial performance. For instance, it was recommended to improve sales position, invest more in advertisements, encourage employees to perform better, and enhance operations efficiency.
Overall, I agree with the authors’ position regarding the significance of identifying the weaknesses of a company. As shown in the case study, comparative statement analysis was effective for evaluating the major improvements and weak spots of Bambino Agro Industries Limited. As a result, the management can take appropriate measures to improve the company’s sales and operations and enhance its current policies. In my view, the comparison of the income statement and the balance sheet offered a better understanding of the firm’s operational efficiency.
Reference
Ravinder, D., & Anitha, M. (2013). Financial analysis – A study. IOSR Journal of Economics and Finance, 2(3), 10-22. Web.