determine the financial and economic situation
Analysis: is the breakdown of a whole into parts to know each of the elements that compose it and then study the effects that each performs.
The analysis of financial statements is the critical process aimed at assessing the financial position, past and present, and results of operations of a company with the primary objective of establishing the best possible estimates and predictions about the condition and future results.
Financial statement analysis rests on two main pillars of knowledge: deep knowledge of the accounting model and the domain of financial analysis tools to identify and analyze the relationships and financial and operating factors.
The most important quantitative data used by analysts are the financial data obtained from the accounting system of enterprises, which help the decision-making. Its importance lies in that they are objective and concrete and have an attribute of measurability.
Interpretation: the transformation of the financial information into a form that it can be used to determine the financial and economic situation of a company to facilitate decision-making.
For a better understanding defines the concept of accounting that is the only viable system for recording and summarizing systematic classification of trading activities.
The limitations of accounting data include: monetary expression, and simplifications inherent in the structure rigieses accounting, use of personal criteria, nature and need to estimate balances at acquisition, instability in the monetary unit.