Financial Performance Analysis
In management accounting, Financial Performance Appraisal (also known as Financial Performance Analysis) is the process of evaluating a company’s financial health, efficiency, and profitability by analyzing its financial statements. 1. Meaning and Definition Meaning: Financial Performance Appraisal is a scientific evaluation of the profitability and financial soundness of a business. It involves "cutting through" the raw numbers in the Balance Sheet and Profit & Loss account to understand the strengths and weaknesses of an organization. Definition: > "Financial Performance Appraisal is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and profit and loss account." — Metcalf and Titard 2. Objectives The primary goals of conducting a financial appraisal are: To Assess Profitability: To determine if the company is earning adequate returns on its invest...