How does financial analysis help decision making?

Decision maker depend on financial analysis provide comparing ratios liquidity ratios, profitability ratios, turnover ratios, all those ratios helps to indicates how business moving on,  

 

• Financial analysis is an         effective tool and                  decisionmaking tool because it helps   the financial process to diagnose the financial  condition of the institution or company and to disclose its   policy and circumstance
• t helps to identify weaknesses to avoid and strengths to strengthen them

 

 

Business decisions are basically carried out through the use of comparative analysis, performance or financial analysis on the published financial statement satified by external auditors, as to whether the statement shows a true and fair view, the statement include the statement of comprehensive income, formally known as trading profit and loss Account, financial position (Balance sheet) and statement of cash flows, these statement entails all the business information such as the flow of cash, solvency, liquidity, going concern, available resources as well as the entire performance of the business as at repoting date. therefore users from different angles, be it internally (management) or externally (stakeholders, public) can use the statement in order to make accurate and realiable decision. 

Financial analysis give investor baseline for their decisions making by ratio analysis, it give help to creditor to assessing the solvency of of the company by liquidity ratio, current ratio and quick interest cover ratio analysis and creditworthiness of the business. And by help of management accounting it helps businesses to secure the resources.

It’s necessary to provide sound information on which decisions to make based on accounting criteria,and support decision-making processes. -Also,it explains howe to use the tools to decoy probu,gather abdel organizee relevant information