The Analysis of Financial Performance

Every enterprise whether big, medium or small, needs finance to carry on its operations and to achieve its targets. In fact, finance is so indispensable today that it is rightly said to be the life blood of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives. So that the study of financial performance is so significant and it is the process of measuring the results of a firm’s operations in monetary terms. It is used to measure firms overall financial health over a given period of time.

Analysis of financial performance focuses on the financial statements, as they are a disclosure of financial performance of a business entity. A financial statement is an organized collection of data according to logical and consistent accounting procedure. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show assets and liabilities position at a moment of time as in case of balance sheet or may reveal a series of activities over a given period of times, as in case of an income statement.

The Cochin International Airport Limited is a novel venture in the history of civil aviation in India where Government of Kerala, NRIs, travelling public, financial institutions, Airport Service Providers and other joined hands in the equity structure. It is a state government sponsored project with public participation mostly 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 the project with a hope to reduce travel cost and time apart from inconveniences. It is managed by the Government representatives, NRIs and representatives of financial institutions. The ground handling at the airport is done by the Air India. This is the first international airport as public private partnership model in India.

Financial analysis provide information on how the firm has performed in the past and what is its current financial position. It is done by establishing relationship between different items in the statements. The first task of financial analysis is to select the information relevant to the decision under consideration from the total information contained in the financial statement. The second step involved in the financial analysis is to arrange the information in a way to highlight significant relationships. And the final step is interpretation and drawing conclusion. In brief, financial analysis is the process of selection, relation, and evaluation. And the ultimate objective of analyzing the financial statement is to get better insight about the financial strength and weakness.

The purpose of the analysis is to diagnose the information contained the financial statements so as to judge the profitability and financial soundness of the firm. A financial analyst analyses the financial statements with various tools of analysis before commenting upon the financial health and weakness of an enterprise. Financial statement analysis is an attempt to determine the significance and meaning of the financial statement data so that forecast may be made of the future earnings, ability to pay interest and maturities and profitability of a sound dividend policy. The analysis and interpretation of financial statement is essential to bring out the mystery behind the figures in financial statements.

Works Cited

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