Everyenterprise whether big, medium or small, needs finance to carry on itsoperations and to achieve its targets. In fact, finance is so indispensabletoday that it is rightly said to be the life blood of an enterprise. Withoutadequate finance, no enterprise can possibly accomplish its objectives. So thatthe study of financial performance is so significant and it is the process ofmeasuring the results of a firm’s operations in monetary terms.
It is used tomeasure firms overall financial health over a given period of time. Analysis of financial performance focuses on thefinancial statements, as they are a disclosure of financial performance of abusiness entity. A financial statement is an organized collection of dataaccording to logical and consistent accounting procedure. Its purpose is toconvey an understanding of some financial aspects of a business firm.
It mayshow assets and liabilities position at a moment of time as in case of balancesheet or may reveal a series of activities over a given period of times, as incase of an income statement. The CochinInternational Airport Limited is a novel venture in the history of civilaviation in India where Government of Kerala, NRIs, travelling public,financial institutions, Airport Service Providers and other joined hands in theequity structure. It is a state government sponsored project with public participationmostly from Non Resident Indians (NRIs) of Kerala from all over the world.There are over 12,000 shareholders from 30 countries who have invested in theproject with a hope to reduce travel cost and time apart frominconveniences. It is managed by the Government representatives, NRIs andrepresentatives of financial institutions. The ground handling at the airportis done by the Air India. This is the first international airport as publicprivate partnership model in India.
Financial analysisprovide information on how the firm has performed in the past and what is itscurrent financial position. It is done by establishing relationship betweendifferent items in the statements. The first task of financial analysis is toselect the information relevant to the decision under consideration from thetotal information contained in the financial statement. The second stepinvolved in the financial analysis is to arrange the information in a way tohighlight significant relationships. And the final step is interpretation anddrawing conclusion. In brief, financial analysis is the process of selection,relation, and evaluation.
And the ultimate objective of analyzing the financialstatement is to get better insight about the financial strength and weakness. The purpose of theanalysis is to diagnose the information contained the financial statements soas to judge the profitability and financial soundness of the firm. A financialanalyst analyses the financial statements with various tools of analysis beforecommenting upon the financial health and weakness of an enterprise. Financialstatement analysis is an attempt to determine the significance and meaning ofthe financial statement data so that forecast may be made of the futureearnings, ability to pay interest and maturities and profitability of a sounddividend policy. The analysis and interpretation of financial statement isessential to bring out the mystery behind the figures in financial statements.