Condition vs. Statement Analysis - Coursework Example

Condition vs. ment Analysis Affiliation Financial ment Analysis Analysis of financial ment is the process of considering an organization’s financial statements such as the balance sheet, cash flow statement, and retained earnings. The process involves the consideration of past, current, and projected performance of the business unit at hand. Financial statements record financial data over a financial year/period. Financial analysis is therefore a method of evaluating the performance of the business at hand (Studenmund, 2011).

A variety of methods are employed in the financial statement analysis among them horizontal and vertical analyses. Horizontal analysis makes use of comparisons over two or more years in both currency and percentage forms. Vertical analysis on the other hand, takes into account entries of the balance sheet and presents them as percentages of the total. Finally, ratio analysis is used in financial statement analysis to show the statistical correlation of data (Finkler, Purtell, Calabrese, and Smith, 2013).

The use of financial statement analysis is primarily aimed at informing effective decision making process.Financial Condition AnalysisWhile financial statement analysis evaluates the financial performance of an organization from its financial data records to showcase performance, financial condition analysis on the other hand, aims at measuring the position of the business or entity at hand. Two considerations under financial condition analysis include resource flow, and resource stock (Studenmund, 2011).

Under resource flow, financial condition analysis takes into account financial indicators such as total margin, charge to expense, and debt service ratios. It also considers financial performance through change in net assets (Finkler, Purtell, Calabrese, and Smith, 2013). Under resource stock, financial condition analysis takes into account financial ratios (indicators) such as quick for testing liquidity, net assets for measuring solvency, debt to asset for measuring leverage, and capital assets condition for measuring capital (Finkler, Purtell, Calabrese, and Smith, 2013).

The use of financial condition analysis is primarily aimed at acknowledging the performance or position of the entity at hand.Finkler, Purtell, Calabrese, and Smith (2013) points that external factors have impact on an organization’s financial performance. In this case, financial condition analysis considers external factors such as competition, market stability, exchange rates, and market volatility. Under these factors, financial condition analysis aims at testing how much the business is able to beat its benchmarks.

Benchmarks are performance baselines that an organization must surpass to render the business sustainable.ReferencesFinkler, S.A., Purtell, R.M, Calabrese, T.D., and Smith, D.L. (2013). Financial management for public, health, and not-for-profit organizations, 4th ed. Upper Saddle River, NJ: Pearson Prentice Hall.Studenmund, A.H. (2011). Using econometrics. New York: Addison Wesley